Managed discretionary accounts, due to their structure, are well-suited for brokers or other authorized individuals to manage an investor's assets.
This solution is appropriate if the investor has confidence in a specific brokerage firm or individual. The advantage is that it "frees up" time for other tasks, and the account owner does not need to spend time researching potential purchases, forecasting future outcomes, or making decisions about selling specific securities.
The risks associated with using managed accounts include:
Disagreement with investment decisions - the provider may make investment decisions that you do not agree with. Even if it aligns with the investment program, you will still have to pay for the investment (or recovery costs).
Changes in your situation - the provider makes investment decisions based on the agreed-upon investment program. If your financial situation changes and you do not update it, the provider may make decisions that are no longer suitable.
You may pay more - fees and expenses can quickly accumulate and reduce the returns on your investments. Managing an account can be significantly more expensive than direct investing.
If you are uncomfortable with these risks or prefer to have control over your investment decisions, managed accounts may not be the right fit for you.
