Opening Your First Brokerage Account: Who will be Managing My Account?

By Geoff Hafer, Spring 2017 Student Intern

In the first part of the series we answered the question, “Did I pick the right broker?”  Today we will address the next question, “Who will be managing my account?”  To answer this question, one must first understand the difference between discretionary and non-discretionary accounts.

In a non-discretionary account, all transactions must be discussed and approved by the client first.  The broker can still contact the client to advise and discuss investment matters but ultimately must receive authorization from the client to make a move.  This allows clients to enjoy a greater degree of participation in the management of their investments.  Discretionary accounts, on the other hand, allow a broker to buy and sell securities without the client’s consent.  Although the broker must stay within the parameters of the client’s stated investment goals, the broker has a varying degree of latitude with a discretionary account.  For a more detailed explanation, see a prior Investor Advocacy Clinic post “Discretionary vs. Non-Discretionary.”

Perhaps just as important as choosing between discretionary vs. non-discretionary, is knowing exactly who the investment professional is that’s managing your account.  There are many types of investment professionals to choose from including brokers, investment advisers, and financial planners.  For more information on each see FINRA’s “Choosing an Investment Professional.”  Regardless of which you choose, it’s important to ask them the right questions:

  • What experience do you have working with people like me?
  • What professional licenses do you currently hold?
  • How do you get paid?
  • Do you or your firm have an overarching investment philosophy?

These are but a few of the questions you should ask your investment professional to ensure your account is in the best hands.  As always, check out your investment professional before you make your final decision using FINRA’s BrokerCheck at www.FINRA.org/BrokerCheck.