Discretionary authority is permission you give an advisor to buy and sell investments in your account without asking you before each trade.
With a non-discretionary account, the advisor recommends and you approve each trade. With discretion, the advisor acts within the limits you agree, which makes rebalancing and tax-loss harvesting faster. You can still set restrictions, such as holdings not to sell or investments to avoid.
Advisers who accept discretion must say so in their brochure, describe the limits clients can place on it, and explain how it is granted, for example by a power of attorney. Discretion to trade is not permission to move money out: beyond deducting the agreed fee, money should only go back to you.
For employer retirement plans, an advisor with discretion over the plan's investments is acting as a 3(38) investment manager.
How to check
Read Item 16 (Investment Discretion) of the firm's Form ADV Part 2A brochure and the authority section of your advisory agreement. Put any restrictions in writing.
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