What is the primary consideration when a client gives full discretion to an investment manager?

When a client grants full discretion to an investment manager, the primary consideration often centers around the safety of principal. This means that the investment manager is expected to protect the initial investment amount and minimize the risk of loss, especially during volatile market conditions. By prioritizing the safety of principal, the manager can make investment decisions that align with a conservative approach, focusing on preserving the client's capital while still seeking reasonable returns.

In scenarios where discretion is given, the investment manager may have the flexibility to adjust the portfolio actively. However, their overarching responsibility is to ensure that the client's assets are safeguarded. This priority informs many decisions made regarding the selection of securities, asset allocation, and response to market changes.

While maximizing returns, liquidity, and tax efficiency are important factors in investment management, they often come secondary to the fundamental goal of protecting the principal, especially in discretionary management agreements where trust in the manager is critical.