A discretionary account is a managed account in which the holder of the account (or investor) entrusts the handling of investments to a third party trader, such as a broker or an advisor, who acts on the investor’s behalf. The third party trader has the authority to make investment decisions, execute trades, and manage the account without receiving explicit instructions from the investor each time a decision must be made.

There are several advantages to setting up a discretionary account. First, trades can be executed quickly and efficiently, often at prices that were unavailable or less desirable to the investor due to the trader’s market knowledge and experience. This can help investors in volatile markets. Second, investors benefit from the expertise of a professional experienced in the world of finance. Third, depending on the investor’s instructions, the traders can use sophisticated tools and models for evaluating investment decisions, increasing the potential for higher returns.

On the other hand, there are several cons associated with a discretionary account. First, this type of account tends to charge higher fees than non-managed accounts. Second, the decision-making process of the trader may prove to be unsuccessful, leading to negative performance. Finally, the policies of the managing firms may not necessarily be transparent. Investors should consider these factors before deciding to open a discretionary account.

In recent times, robo-advisers have become a popular option for investors who prefer to have discretion over their accounts. Robo-advisers are digital programs that use algorithms driven by complex software to help investors make informed decisions about their investments. They may also offer certain benefits that traditional advisors do not provide.

In conclusion, setting up a discretionary account should be done with careful consideration. Investors should make sure to choose a broker or advisor that is experienced and reputable, and has a proven track record of success. The investor should also understand the fees and policies associated with this type of account. Finally, when in doubt, robo-advisers can be used to supplement traditional investors' advice.