Discretionary vs Non-Discretionary Advisors: Who Makes the Trades?
Advisable Finance · Last updated October 2, 2026
Educational only. Not investment, tax, or legal advice. This page explains discretionary and non-discretionary investment management and counts what SEC-registered firms report. It does not tell you which arrangement to choose. A listing on Advisable is not an endorsement. Confirm the details on the firm's Form ADV, its advisory agreement, and the SEC's Investment Adviser Public Disclosure site.
Direct answer
Discretionary authority means the firm can decide which securities to buy and sell for the account. With non-discretionary management, the firm has an ongoing job to recommend specific securities, and a trade happens only if you accept it, after which the firm arranges it. In the SEC file labeled Registered Investment Advisers, October 2026, 88.2% of regulatory assets ($64.8 trillion of $73.4 trillion) at the 9,807 firms that report at least one everyday individual client are discretionary. Many firms do both: 4,955 of the 9,704 of those firms with any regulatory assets (51.1%) also report some non-discretionary assets.
What discretionary authority means
The Form ADV glossary defines it this way:
Your firm has discretionary authority or manages assets on a discretionary basis if it has the authority to decide which securities to purchase and sell for the client. Your firm also has discretionary authority if it has the authority to decide which investment advisers to retain on behalf of the client.
In plain terms, the firm can place the trade without a separate yes from you on that order. The second sentence covers a firm that can choose other advisors to retain for the client. You can still set limits. Part 2A Item 4.C tells the firm to explain whether clients may impose restrictions on certain securities or types of securities. Item 16 tells a firm that accepts discretion to describe those limits and the procedure it follows before it assumes the authority. The example in the instructions is execution of a power of attorney.
Item 4.B of the brochure is the services description. It asks the firm to describe the types of advisory services it offers. The dollar split between discretionary and non-discretionary assets is Item 4.E, not Item 4.B. Part 1 uses a different item, Item 5.F, for regulatory assets under management. The two dollar figures do not have to match. The brochure instructions say the method for "client assets you manage" in Item 4.E can differ from the regulatory-assets method in Part 1, the amount may be rounded to the nearest $100,000, and the "as of" date must be no more than 90 days before the brochure was last updated for that item.
What non-discretionary management means
The glossary defines discretionary authority. It does not give a separate dictionary entry for non-discretionary. The working definition is in the instructions for calculating regulatory assets under management.
The instructions count an account as continuous management in two ways. One is discretionary authority plus ongoing supervision. The other is no discretionary authority, but an ongoing duty to recommend specific securities based on the client's needs and, if the client accepts, to arrange the trade. That second path is the non-discretionary column in Item 5.F.
The firm names a buy or sell. You accept it. Then the firm arranges the trade. The instructions say the advisory contract is one factor: an agreement to provide ongoing management points toward this kind of service, and other contract terms, or what the firm actually does, can point the other way.
Some advice never enters this count. The instructions exclude market-timing tips with no ongoing management, impersonal advice such as a newsletter, a one-time allocation, and advice on an intermittent or periodic basis. Their example of periodic advice is a review on request, after a market event, or on a set date such as a quarterly adjustment. Approving each trade does not by itself put an account in Item 5.F; the firm also needs the ongoing responsibility described above.
What you give and what you keep
Both arrangements can be continuous management under the instructions. The Commission's 2019 interpretation says the federal fiduciary duty may not be waived, and that it applies in a manner that reflects the agreed-upon scope of the relationship. An ongoing relationship paid with a periodic asset-based fee comes with a relatively extensive duty to advise and monitor. A one-time plan for a one-time fee, with no express monitoring promise, generally does not. The label on the account does not replace the contract.
When the firm decides the trades
The firm chooses the securities and can send the order without asking you about that trade. You can still write limits into the relationship: security types you do not want, industries you want left out, or a cash level you want held. Those limits belong in the agreement and, if the firm accepts discretion, in the Item 16 disclosure.
When you approve each trade
The firm recommends a specific security. The trade waits until you accept it. Then the firm arranges or effects it, if the relationship is the continuous kind Item 5.F describes. You keep the decision on each order. The firm can still have an ongoing job to watch the account and bring the next recommendation, if the contract says so.
What SEC filings show about who decides
Item 5.F(2) asks for regulatory assets and accounts in three columns: discretionary, non-discretionary, and total. We counted the 9,807 firms that report at least one individual client who is not high net worth. Of those, 9,704 report regulatory assets above zero. The dollars and accounts below are the whole book at those firms, not only the everyday clients.
| Type | Regulatory assets | Share of assets | Accounts | Share of accounts |
|---|---|---|---|---|
| Discretionary | $64.8 trillion | 88.2% | 62,663,283 | 79.4% |
| Non-discretionary | $8.6 trillion | 11.8% | 16,280,289 | 20.6% |
| Total | $73.4 trillion | 100% | 78,943,572 | 100% |
(Source: SEC, Information About Registered Investment Advisers and Exempt Reporting Advisers. Registered Investment Advisers, October 2026. Computed by Advisable on October 2, 2026.)
Most of the money is discretionary. Non-discretionary accounts are 20.6% of accounts but hold 11.8% of the dollars.
For comparison, across all 17,210 SEC-registered firms in the file, including firms with no individual clients, 92.8% of regulatory assets are discretionary ($165.1 trillion of $177.9 trillion). The 88.2% figure above covers only the 9,807 firms with everyday individual clients.
Counting firms instead of dollars, here is the mix among the 9,704 everyday-client firms with any regulatory assets:
| Type | Firms | Share |
|---|---|---|
| Discretionary assets only | 4,749 | 48.9% |
| Both discretionary and non-discretionary assets | 4,673 | 48.2% |
| Non-discretionary assets only | 282 | 2.9% |
| Total with regulatory assets | 9,704 | 100% |
(Source: SEC, Information About Registered Investment Advisers and Exempt Reporting Advisers. Registered Investment Advisers, October 2026. Computed by Advisable on October 2, 2026.)
Put another way, 9,422 of these 9,704 firms (97.1%) report some discretionary assets and 4,955 (51.1%) report some non-discretionary assets. And 5,682 of the 9,704 (58.6%) are at least 99% discretionary, next to a median of 99.96%.
Larger books are more likely to include at least some non-discretionary assets. The share of dollars that are discretionary stays in a narrow band.
| Regulatory assets | Firms | Any non-discretionary assets | Share of firms | Discretionary share of assets |
|---|---|---|---|---|
| Under $100 million | 636 | 198 | 31.1% | 87.7% |
| $100 million to $1 billion | 6,992 | 3,395 | 48.6% | 90.5% |
| $1 billion to $10 billion | 1,672 | 1,086 | 65.0% | 87.6% |
| $10 billion or more | 404 | 276 | 68.3% | 88.2% |
(Source: SEC, Information About Registered Investment Advisers and Exempt Reporting Advisers. Registered Investment Advisers, October 2026. Computed by Advisable on October 2, 2026.)
The 404 firms at $10 billion or more are 4.2% of the 9,704 firms and hold 90.4% of the $73.4 trillion. Set those firms aside and the picture is almost the same: at the other 9,300 firms, 88.6% of regulatory assets are still discretionary.
What this data does not show
These are firm-level dollar and account fields. A firm that checks both columns may run your account entirely one way. Item 5.F does not say which of the firm's accounts are yours.
The dollars are the firm's regulatory assets, not a household account balance. At these 9,807 firms, assets reported for individual clients, including high net worth individuals, are 35.7% of the $73.4 trillion. Pensions, funds, and other clients make up the rest. The 88.2% figure is the mix of the whole book at firms that serve at least some everyday individuals.
Item 5.F counts only portfolios that meet the continuous-management test. Advice you implement yourself, a one-time plan, or a quarterly review that the instructions treat as periodic is not in these dollars.
The file covers SEC-registered firms only. State-registered advisors are not in it. The fields are what firms reported. We did not audit a single account. Part 2A Item 4.E can use a different asset method than Part 1, so a brochure total can differ from Item 5.F on purpose. Nothing here is a fee rate, a return, or a ranking of business models.
How to read the paperwork
You can see the firm's own report in three places, then match it to your agreement.
- Form ADV Part 1, Item 5.F. This is the regulatory-asset split: discretionary, non-discretionary, and total, in dollars and in accounts. It is firm-wide.
- Form ADV Part 2A, Item 4.B, for the types of services, Item 4.C for whether you may restrict certain securities, and Item 4.E for the discretionary and non-discretionary asset amounts the brochure uses, with the "as of" date.
- Form ADV Part 2A, Item 16, if the firm accepts discretionary authority. This is where it describes limits clients place on that authority and the procedure before it takes the authority.
Then read the advisory agreement. The instructions tell firms that the contract terms are one factor in whether the service is ongoing management. The agreement is also where your account, as opposed to the firm's whole book, is classified.
Questions that apply whether the firm trades on discretion, waits for your approval, or does some of each:
- On this account, who decides the securities, and do I approve each trade?
- What restrictions can I put on security types or cash, and where are they written?
- What do I sign before you can trade, and does it allow trades only, fee payments from the account, or other withdrawals?
- How often will you review this account, and is that frequency in the agreement?
Trading permission and withdrawal permission
Item 16's example of the step before discretion is execution of a power of attorney. The Form ADV glossary uses a different phrase, "general power of attorney," for an arrangement that lets the firm withdraw client funds or securities from the custodian on its instruction. That withdrawal authority is part of the definition of custody.
The SEC's 2003 release adopting the custody-rule amendments, Release No. IA-2176, says:
An adviser with power of attorney to sign checks on a client's behalf, to withdraw funds or securities from a client's account, or to dispose of client funds or securities for any purpose other than authorized trading has access to the client's assets.
A footnote in the same release (footnote 10) adds:
An adviser's authority to issue instructions to a broker-dealer or a custodian to effect or to settle trades does not constitute "custody."
The same release says an advisor authorized to deduct advisory fees or other expenses directly from a client's account has custody of the funds and securities in that account.
How Advisable fits
Advisable is a free directory of SEC-registered investment advisors. You can search by name or ZIP code and filter by services, assets under management, and fee types at app.advisable.finance. A profile shows the firm's reported services, fee types, assets under management, and client count, with a link to the firm's official SEC record. Advisors can claim their profile for free. The discretionary split lives on that SEC record, in Item 5.F and in Part 2A Items 4 and 16, which is where you confirm how a specific firm handles trades.
FAQ
What is a discretionary investment advisor?
A discretionary advisor has authority to decide which securities to buy and sell for the client. The glossary also counts authority to choose other advisors to retain for the client. You can still set written limits, and Item 16 is where the firm describes the authority, the limits, and the procedure for taking it.
What is non-discretionary investment management?
In the Form ADV instructions, non-discretionary continuous management means the firm does not have authority to decide the securities, but it does have an ongoing duty to recommend specific securities and, if you accept, to arrange the trade. It is one of the two ways an account gets counted in regulatory assets. Occasional advice, such as a review only when you call, is described separately and may not be in that count.
Can one firm do both?
Yes. In this file, 4,673 of 9,704 everyday-client firms with regulatory assets report both. Another 4,749 report discretionary assets only, and 282 report non-discretionary assets only. Ask which column your account sits in.
Is trading authority the same as permission to withdraw money?
Trading and withdrawals are separate permissions. The Form ADV glossary treats a general power of attorney to withdraw funds as custody. Release No. IA-2176, the SEC's 2003 release adopting the custody-rule amendments, says in footnote 10 that authority to instruct a broker-dealer or custodian to effect or settle trades is not custody. The same release says an advisor allowed to deduct advisory fees directly from a client's account has custody of that account: "Similarly, an adviser authorized to deduct advisory fees or other expenses directly from a client's account has access to, and therefore has custody of, the client funds and securities in that account."
Where do I see this on Form ADV?
Part 1 Item 5.F is the regulatory-asset split between discretionary and non-discretionary, in dollars and accounts. Part 2A Item 4.B describes the services, Item 4.C covers restrictions you may impose, and Item 4.E gives the brochure's discretionary and non-discretionary asset amounts and the as-of date. Item 16 covers investment discretion if the firm accepts it.
Does the fiduciary duty disappear if I approve each trade?
No. The Commission has said this federal fiduciary duty may not be waived, and that it applies in line with the scope you and the firm agree to. An ongoing relationship and a one-time plan do not carry the same monitoring obligation. The agreement is what sets that scope, for discretionary and non-discretionary accounts alike.
Are most advisors discretionary?
Among the 9,704 everyday-client firms with regulatory assets, 97.1% report some discretionary assets and the median share is 99.96%. In that same group, 51.1% also report some non-discretionary assets. Fully non-discretionary books are 282 firms. Those are firm-wide reports for SEC-registered firms, not a headcount of people.
Sources
- SEC, Form ADV Part 1A (Item 5.F, discretionary and non-discretionary regulatory assets and accounts). https://www.sec.gov/files/formadv-part1a_1.pdf. Accessed October 2, 2026.
- SEC, Form ADV instructions and glossary (Item 5.F calculation, discretionary authority, custody and general power of attorney). https://www.sec.gov/about/forms/formadv-instructions.pdf. Accessed October 2, 2026.
- SEC, Form ADV Part 2 (Items 4.B, 4.C, 4.E, and 16). https://www.sec.gov/about/forms/formadv-part2.pdf. Accessed October 2, 2026.
- SEC, "Commission Interpretation Regarding Standard of Conduct for Investment Advisers," Release No. IA-5248, effective July 12, 2019. https://www.sec.gov/rules/interp/2019/ia-5248.pdf. Accessed October 2, 2026.
- SEC, "Custody of Funds or Securities of Clients by Investment Advisers," Release No. IA-2176, effective November 5, 2003. https://www.sec.gov/files/rules/final/ia-2176.htm. Accessed October 2, 2026.
- SEC, Information About Registered Investment Advisers and Exempt Reporting Advisers, Registered Investment Advisers, October 2026 (ia100226.zip). https://www.sec.gov/data-research/sec-markets-data/information-about-registered-investment-advisers-exempt-reporting-advisers. Accessed October 2, 2026.
Related reading
- How to Read Fees on Form ADV
- What Is a Wrap Fee Program?
- How Much Money Do You Need for a Financial Advisor?
Method note
Figures use the file labeled Registered Investment Advisers, October 2026 (zip ia100226.zip on the SEC's Information About Registered Investment Advisers and Exempt Reporting Advisers page). The CSV inside the zip has an older name. We dated the file from the SEC page label and from the newest Latest ADV Filing Date, October 1, 2026. The file has 17,210 firms. We read it as Latin-1 and treated blanks as zero when summing dollars.
An everyday-client firm has Item 5.D(a)(1) greater than zero, or Item 5.D(a)(2) beginning with "Fewer" (individuals who are not high net worth). That group is 9,807 firms. Dollar shares use Item 5.F(2)(a) divided by Item 5.F(2)(c). Account shares use Item 5.F(2)(d) divided by Item 5.F(2)(f). Discretionary plus non-discretionary equals the total on every row. Firms with zero regulatory assets (103 of the 9,807) stay in the everyday-client count and drop out of the 9,704-firm mix and the size bands. Bands use Item 5.F(2)(c): under $100 million, $100 million up to but not including $1 billion, $1 billion up to but not including $10 billion, and $10 billion or more. "At least 99%" means discretionary dollars are at least 99% of that firm's regulatory assets. The median is the average of the two middle firm-level shares among the 9,704. Individual-client assets are Item 5.D(a)(3) plus Item 5.D(b)(3).
We computed every figure two independent ways on October 2, 2026 (pandas, and SQL on a separate parse of the same file), then sanity-checked the results against an outside industry tally and a random sample of filings. Displayed percentages are rounded from the unrounded counts.
Educational reminder: This page is not investment advice. Verify details on official sources before making decisions.