What distinguishes discretionary asset management from non-discretionary asset management?

What distinguishes discretionary asset management from non-discretionary asset management?

• A. Discretionary management requires client approval for each trade, while non-discretionary does not
• B. Discretionary management allows the manager to make investment decisions without client approval, while non-discretionary requires client approval
• C. Non-discretionary management focuses solely on real estate investments
• D. There is no difference; both require comprehensive reports

Answer: (B)

Discretionary asset management is characterized by the investment manager's ability to make decisions and execute trades on behalf of the client without needing to seek prior approval for each transaction. This means that the asset manager has the authority to act independently based on their expertise and market conditions, allowing for a more streamlined investment process. Clients typically opt for discretionary management when they trust the manager's skills and wish to delegate the day-to-day investment decisions to them. In contrast, non-discretionary asset management requires the manager to consult with the client and obtain their approval before executing any trades. This approach is often preferred by clients who wish to maintain a greater degree of control over their investment decisions and want to be involved in every step of the management process. The other options present concepts that do not accurately describe the distinction between discretionary and non-discretionary management. For instance, non-discretionary management does not exclusively focus on real estate investments, and both types of management can provide comprehensive reports, but the level of control and decision-making authority is what fundamentally sets them apart.

Discretionary asset management is characterized by the investment manager's ability to make decisions and execute trades on behalf of the client without needing to seek prior approval for each transaction. This means that the asset manager has the authority to act independently based on their expertise and market conditions, allowing for a more streamlined investment process. Clients typically opt for discretionary management when they trust the manager's skills and wish to delegate the day-to-day investment decisions to them.

In contrast, non-discretionary asset management requires the manager to consult with the client and obtain their approval before executing any trades. This approach is often preferred by clients who wish to maintain a greater degree of control over their investment decisions and want to be involved in every step of the management process.

The other options present concepts that do not accurately describe the distinction between discretionary and non-discretionary management. For instance, non-discretionary management does not exclusively focus on real estate investments, and both types of management can provide comprehensive reports, but the level of control and decision-making authority is what fundamentally sets them apart.