Advisor Limited Discretion (ALD)
When an advisor has discretion over an account, s/he can make investment decisions without the consent of the client. If the advisor simply has the authority to recommend various transactions, and the client is required to consent to such recommendations before they are acted upon, the advisor does not have investment discretion.
An advisor with discretion may still choose to inform his/her client of a planned change to the portfolio, but this is not a requirement.
How do I obtain discretion over an account?
Qualification guidelines*
The following guidelines apply to North Star Resource Group advisors who want to exercise limited investment discretion*:
- Satisfactory disciplinary/complaint history**
- Series 7 licensed
- Minimum of five years as a producing financial advisor
- At least $5 million of Spectrum Advisor or Portfolio Solutions I assets under management or $10 million of total advisory assets under management
- Have a field principal willing to supervise limited investment discretion activity
Ongoing requirements
- Advisors exercising ALD with non-Symplany℠ accounts must use Envestnet® to manage their accounts and model allocations
- Advisors must hold at least 1 review meeting annually with clients, completing a CARS form to reflect that conversation
- A quarterly drift report is run by the compliance team listing any accounts with discretion authorized that are drifting more than 5% as a sub-asset class for more than 90 days (this report is sent to the advisor to respond to and/or take action on).
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*Interested advisors who meet the criteria can contact Mariann Rutter to evaluate these qualifications
**If the individual has a history of progressive discipline, complaints, or something disclosed on their U-4, they may be ineligible.
What can I do with discretion?
Discretionary trading authorization allows an advisor to do the following without verbal authorization from a client (in Spectrum or Portfolio Solutions accounts only):
- Rebalance to the allocation agreed to by the client - to sell or buy existing open‐ended mutual funds or ETFs in the account.
- Fund substitutions/new fund selections (essentially “buy” trades outside of a rebalance). However, those funds must be from the IRG’s preferred funds list.
- Sell funds when a client requests a distribution of cash – ensuring the remaining funds are invested so that investment model/asset allocation is intact.
- Purchase funds in the case of a cash contribution in accordance with the account’s current allocation; rebalance to the existing model.
- Stocks cannot be traded with discretion.