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Discretionary Managed Account Agreement

A discretionary managed account agreement (DMAA) is a contract between an investor and a financial advisor or investment manager. It gives the investment manager the power to manage the investor`s assets, including buying and selling securities, without requiring the investor`s approval for each transaction.

This type of account agreement is typically used by high net worth individuals, family offices, and institutional investors who want to delegate the investment management to a trusted professional. The investment manager is expected to make investment decisions based on the client`s objectives, risk tolerance, and other factors agreed upon in the contract.

The DMAA typically outlines the investment strategy and objectives, the investment manager`s compensation, and the terms and conditions of the agreement. It also includes provisions for reporting and monitoring the account`s performance, as well as the investor`s right to terminate the agreement.

One of the key advantages of a DMAA is the flexibility it offers to the investment manager. Without the need for approval from the investor for each transaction, the manager can quickly respond to market conditions and take advantage of investment opportunities. This can result in better returns for the investor.

However, investing through a DMAA also comes with risks. The investor is entrusting the investment manager with their assets, and there is a risk of the manager making poor investment decisions or engaging in unethical behavior. It is important for the investor to carefully select a reputable and experienced investment manager and to regularly monitor the account`s performance.

In addition, the fees for a DMAA can be higher than other investment options, as the investment manager is providing a higher level of service and taking on more responsibility.

As with any investment decision, it is important for the investor to carefully consider their objectives, risk tolerance, and other factors before entering into a DMAA. Seeking the advice of a trusted financial advisor can also help investors make informed decisions about their investments.

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