The discretionary account list: how a small RIA keeps it accurate
A discretionary account list is a record of which accounts the firm manages with discretionary authority, and the document that grants that authority for each one. It goes stale because account status changes quietly: an account moves to held away, a limited mandate starts, a reporting-only account becomes managed. The fix is to update the list in the same step that changes the account, and to check it against your actual accounts on a set schedule.
Most records in a small firm change because someone sets out to change them. The discretionary account list changes because something else happened. A client moves an account to another firm. They sign a limited mandate. They ask you to start managing an account you were only reporting on. The work changes that day. The list changes when someone remembers, and in a small firm that can be months later, or at the next exam.
What is a discretionary account list?
It's a record of the accounts the firm manages with discretion, each with its current status, the date that status started, and the document that gives the firm authority. That's the whole thing. It doesn't need to be long. It needs to match reality.
| Field | Example |
|---|---|
| Account | Joint brokerage, ending 4821 |
| Household | The household it belongs to |
| Status | Discretionary, limited purpose, non-discretionary, held away |
| Authority document | Advisory agreement or power of attorney, with date |
| Effective from | The date the current status started |
Illustrative example.
Why does the discretionary list matter beyond itself?
Because discretionary status drives other work. It affects billing, since some statuses are excluded from the fee. It affects trading, since you should only trade with discretion where you have authority. And it affects reviews, since what you review depends on what you manage. A wrong status on the list can quietly produce a wrong bill or a trade in an account the firm shouldn't touch.
| If the list says | But the account is really | What can go wrong |
|---|---|---|
| Discretionary | Held away | A rebalancing trade attempted on an account you no longer manage. |
| Non-discretionary | Discretionary | An account left out of a fee it should carry. |
| Discretionary | Limited purpose | Trades placed outside what the client agreed to. |
How do you keep the list current?
With three habits, applied every time.
- Change the list in the same step as the account. If you change an account's status anywhere, the list changes too, by the same person, the same day.
- Date every status. "Discretionary from 1 March" is a record. "Discretionary" on its own is a guess about the present.
- Compare it to the accounts on a schedule. Any account missing from the list, or any listed account that no longer exists, is a fix. Your procedures set the schedule; quarterly is a common choice.
A worked example
Take a two-person RIA with about 120 households and around 300 accounts. The firm compares its discretionary list to its account records once a quarter.
At one quarterly check, three things turn up. A rollover IRA opened two months ago isn't on the list at all, though the firm has been managing it under the household's advisory agreement. A taxable account that a client moved to their bank's brokerage arm in the spring is still listed as discretionary. And one account is listed as discretionary with no authority document referenced.
The fixes take about forty minutes. The IRA is added with its start date and the agreement that covers it. The moved account is changed to held away, dated the day the transfer completed, and removed from its model. For the third, the firm finds the signed agreement in the client's file and adds the reference. Each fix is a dated change, so the history shows what the list said before and after.
The bigger lesson is the first two items. Both were changes someone made to the account without touching the list. That's the habit to fix, not the quarterly check.
When is a separate list overkill?
If every account you manage is discretionary under one standard agreement and you hold nothing away, a separate list adds little. A status field on each account record, with a date and a document reference, may be enough, provided you can produce it as a list when asked. The separate list earns its place once you have mixed statuses, limited mandates or held-away accounts, which most firms do within a year or two.
How Advorra handles it
In Advorra, each account carries its discretionary status (managed discretionary, modeled or limited purpose, non-discretionary reporting only, or held away), and the firm keeps a discretionary-authority register among its compliance records, included in the records production pack. If your list lives in a spreadsheet that drifts from your accounts, see how the status sits on the account itself on the product page, or read the books and records guide.
General information, not legal or compliance advice. Your procedures and compliance consultant decide what your firm must record.
Questions advisors ask
Should held-away accounts be on the list at all?
It helps to list them with a held-away status rather than leave them off. That way every account in the household is accounted for, and nobody wonders whether one was forgotten.
What if I can't find the authority document for an account?
Note the gap on the list, ask the client to sign a fresh agreement or authorisation, and don't trade with discretion until it's in place. A known gap with a fix date is better than a list that looks complete and isn't.
Can one advisory agreement cover several accounts?
Often yes, if the agreement names them or covers all accounts in the relationship. Reference the same document against each account it covers, so the link is visible from either side.
Who should update the list?
Whoever changes the account's status. If that's a different person each time, the list will drift.
Is this compliance advice?
No. It is a practical way to keep a record accurate. Your procedures and compliance consultant decide what your firm must record.
See it on a demo firm
Advorra is practice software for independent RIAs: clients, models, IPS, billing and compliance records in one place, on top of the custodian you already use. Built by The CollabHub.
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