Investment Discretion: What It Means for Financial Management

Q: Who can have investment discretion?

Both individuals and institutions, such as banks and financial advisors, can have investment discretion over accounts.

Q: Is investment discretion the same as fiduciary duty?

No, investment discretion refers to decision-making authority, while fiduciary duty is the obligation to act in the best interest of another party.

Q: What should I do if I have concerns about investment discretion?

Review your agreements and consult with a financial or legal advisor for guidance.

Definition & Meaning

Investment discretion refers to the authority, either solely or shared, to make decisions about buying or selling securities or other assets on behalf of an investment account. This authority can be exercised by a bank or financial institution that manages investments, or it can be delegated to another party. Both the delegating bank and the party receiving the authority are considered to have investment discretion.

Table of content

Legal Use & context

Investment discretion is commonly used in financial and investment law. It plays a critical role in the management of investment accounts, particularly in fiduciary relationships where one party manages assets for another. Legal practitioners may encounter this term in contexts such as:

Investment management agreements
Trust administration
Estate planning

Users can often manage their investment accounts with the help of legal templates and forms provided by services like US Legal Forms, which are drafted by experienced attorneys.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A financial advisor has investment discretion over a client's retirement account, allowing them to buy and sell stocks without needing prior approval for each transaction.

Example 2: A bank manages a trust fund for a family and has been granted investment discretion to manage the assets according to the trust's terms. (hypothetical example)

State-by-state differences

Examples of state differences (not exhaustive):

State	Key Differences
California	Investment advisers must register with the state and comply with specific fiduciary duties.
New York	Investment discretion is regulated under the New York State Banking Law.

This is not a complete list. State laws vary, and users should consult local rules for specific guidance.

Comparison with related terms

Term	Definition	Differences
Investment Authority	The power to make decisions regarding investments.	Investment discretion includes the ability to delegate that authority.
Fiduciary Duty	The legal obligation to act in another party's best interest.	Investment discretion may involve fiduciary duties, but not all authorities carry this obligation.

Common misunderstandings

What to do if this term applies to you

If you find yourself in a situation where investment discretion applies, consider the following steps:

Review your investment management agreements to understand the extent of the discretion granted.
Consult with a financial advisor to ensure that your investments align with your goals.
Explore US Legal Forms for templates that can help you manage your investment agreements effectively.
If your situation is complex, seek professional legal assistance.

Find the legal form that fits your case

Browse our library of 85,000+ state-specific legal templates.

This field is required

Quick facts

Attribute	Details
Typical Fees	Varies by institution; may include management fees.
Jurisdiction	State and federal regulations apply.
Possible Penalties	Violations of fiduciary duty can lead to legal action.

Key takeaways

Frequently asked questions

What is investment discretion?

Investment discretion is the authority to make decisions about buying or selling assets on behalf of an investment account.