Discretion

There’s a great old piece of wisdom that states, “Discretion is the better part of valor.” In other words, choosing when to be brave (discretion) is actually more important than being brave itself. Nothing could be truer of the investing process. Knowing what to invest in (which security) is typically far more important than how the actual transaction itself takes place (when to invest and at what price). That doesn’t mean that timing doesn’t matter, but common sense says that buying the worst investment at the right time can be far more damaging than buying the right investment at the wrong time.

All that is to say, when a client initiates a new relationship with a securities professional, it is assumed that the client holds discretion over the type of securities that are bought in the account, the timing, and the price. In other words, a securities professional can’t just begin exercising decision-making power, or discretion, over a client’s account, making trades whenever they see fit. If they do begin making trades without the client giving them the authorization to do so, they’re in violation and subject to legal consequences.