A client has engaged a portfolio manager to manage their investments. The client has provided written authorization for the manager to make investment decisions without requiring prior client approval for each trade. The agreement explicitly outlines the client's investment objectives, risk tolerance, and any investment constraints. What type of account has this client most likely opened?

Question: A client has engaged a portfolio manager to manage their investments. The client has provided written authorization for the manager to make investment decisions without requiring prior client approval for each trade. The agreement explicitly outlines the client's investment objectives, risk tolerance, and any investment constraints. What type of account has this client most likely opened?

Answer options:

• Advisory account ✅ Discretionary account
• Self-directed account
• Wrap account

Correct answer: Discretionary account

Explanation: A discretionary account grants the portfolio manager the authority to make investment decisions and execute trades on behalf of the client without obtaining prior approval for each transaction, based on the agreed-upon investment policy statement. An advisory account still requires client approval for trades, while a self-directed account gives the client full control. A wrap account bundles advisory and execution services but isn't defined by the level of discretion alone.