What distinguishes a managed account from a standard account?

What distinguishes a managed account from a standard account?

• A. The client has full control over all decisions
• B. Investment decisions are made consistently by the dealer member or a third party
• C. It is solely for retirement savings
• D. There are no fees associated with transactions

Answer: (B)

A managed account is characterized by the delegation of investment decisions to a professional, such as a dealer member or a third party. This means that the investment manager actively makes decisions regarding how the funds are allocated, which securities to buy or sell, and when to execute trades, based on the client’s investment objectives and risk tolerance. This professional management often aims to optimize returns and manage risks more effectively than an individual investor might achieve on their own.

In contrast to a standard account where the client typically retains full control and makes their own investment decisions, a managed account relies on the expertise of the investment manager to make those choices. This shift in responsibility is what fundamentally distinguishes a managed account from a standard account. Moreover, managed accounts can be tailored to individual client needs and can incorporate various strategies to achieve specific financial goals, which is not the case with standard accounts.

The other options either inaccurately describe the nature of managed accounts or do not pertain specifically to what distinguishes them from standard accounts. For example, having full control over all decisions pertains to standard accounts, not managed accounts. Additionally, while managed accounts can be utilized for retirement savings, they are not limited to this purpose. Lastly, discussing fees associated with transactions does not define what a managed account is