Discretionary investment management refers to an investment strategy where a portfolio manager or investment advisor has the authority to make investment decisions on behalf of a client without requiring their explicit approval for each transaction. In this approach, the investment professional has the discretion to buy or sell securities, allocate assets, and make other investment-related decisions within the agreed-upon guidelines and objectives.

Key features of discretionary investment management include:

1. **Investment Authority:** The portfolio manager or investment advisor is granted the authority to make investment decisions without seeking prior approval from the client for each trade or action.

2. **Client Guidelines:** Despite having discretionary authority, the investment professional operates within the framework of guidelines established by the client. These guidelines typically include the client’s risk tolerance, investment objectives, time horizon, and any specific preferences.

3. **Customized Portfolios:** Discretionary investment management often involves creating and managing customized portfolios tailored to the specific needs and goals of individual clients.

4. **Active Portfolio Management:** Portfolio managers actively monitor the financial markets, economic conditions, and other relevant factors to make informed decisions and adjustments to the portfolio.

5. **Asset Allocation:** Discretionary managers have the flexibility to adjust the allocation of assets (e.g., stocks, bonds, cash) based on their assessment of market conditions and the client’s investment goals.

6. **Risk Management:** Portfolio managers employ risk management strategies to control the level of risk in the portfolio, aligning with the client’s risk tolerance and overall financial objectives.

7. **Regular Reporting:** Despite the discretion granted to the portfolio manager, clients typically receive regular reports detailing the performance of their portfolios, holdings, and any changes made.

Discretionary investment management is often contrasted with non-discretionary or advisory relationships where investment decisions require explicit approval from the client before implementation. The discretionary approach is suitable for clients who prefer to delegate investment decisions to professionals, trusting them to make timely and informed choices in line with the client’s objectives.

Investment advisors providing discretionary services are often regulated by financial authorities, and they have a fiduciary responsibility to act in the best interests of their clients. This relationship involves a high degree of trust, as clients rely on the expertise and judgment of the investment professional to manage their investments effectively.