Recently, many people have been asking how to buy U.S. stocks via a discretionary account, so I’ll go ahead and summarize this topic. In fact, what a discretionary account really means is that you place orders through a domestic broker, and the broker then places orders for you with an overseas broker. It sounds roundabout, but it’s actually the most convenient option for beginners.

The full name of a discretionary account is “Agency Trading of Foreign Securities.” You open an account with a domestic broker, and then you can buy U.S. stocks, Hong Kong stocks, and Japanese stocks. The whole process works like this: you place an order through an app. After the domestic broker receives it, it forwards the order to an overseas partner broker. The overseas broker executes the trade on U.S. exchanges, then reports the results back to the domestic broker, and finally updates your account. After the trade is completed, the stocks are held in the broker’s overseas custody account. You enjoy the rights, but the broker holds them in name—this is very common in international markets.

The biggest benefit is peace of mind. You can settle in TWD directly, dividends are remitted back to your domestic account, and tax issues are handled by professionals. The downsides are also obvious: the commission fees are much higher than those of overseas brokers, the product range is limited, and automatic dividend reinvestment isn’t available. However, if you’re a long-term investor with a large amount of capital but infrequent trading, a discretionary account is actually enough.

When it comes to fees, this is what many people care about most. The commission fee is roughly 0.1% to 1% of the transaction amount, and there’s also a minimum fee threshold, usually between 25 and 50 dollars. However, Cathay Securities has recently reformed its policy and has already abolished the minimum fee requirement—this is considered conscientious by the industry. In addition to the commission, you also have to factor in other charges such as the SEC rate of 0.00278% and a transaction activity fee of $0.000119 per share. If you trade frequently, these costs can add up to a substantial amount.

There are several rules to keep in mind when trading via a discretionary account. First, only limit orders are accepted—you can’t place orders using the current market price. Your account pre-deposited funds must be sufficient; otherwise, you may be able to place the order, but it won’t be executed. This involves a concept called “funds in transit,” meaning the money from selling stocks that hasn’t been settled yet. The key point is that funds in transit can actually be used immediately to buy other stocks—so you can sell and then buy right away. But if you want to withdraw cash, you’ll have to wait until the settlement is completed. U.S. stock trading hours are from 09:30am to 4:00pm (U.S. time). Converted to Taiwan time, during daylight saving it is 21:30pm to 04:00am, and during standard time it is 22:30pm to 05:00am. For purchases, debiting occurs on T+1, and for sales, it’s T+3 before it’s credited to your account—so you should be mindful of this time lag.

Another hidden cost of discretionary account trading is the foreign exchange rate spread. Brokers use a fixed exchange rate for settlement, so there is an exchange-rate margin. Also, if your bank’s foreign exchange market is closed, while the discretionary account itself may still be open, you won’t be able to handle currency conversion.

Opening an account isn’t complicated. You can apply once you’re 18 years old. Prepare your ID card, a second form of ID, a seal/stamp, and a copy of your bank account statement. You can apply either in person at the counter or online; once you sign the agreement, it’s done. When opening the account, you need to tell the broker the broker code and choose whether the settlement currency is TWD or USD.

In Taiwan, the commission fees charged by mainstream discretionary-account brokers are actually not that different. Cathay Securities charges 0.1%, E.SUN 0.4%, Taishin and CTBC each charge 0.5%, and Fubon, Yuanta, KGI, and others are all in the range of 0.5% to 1%. There is room for negotiation with each firm, but compared with overseas brokers, it’s still more expensive. If you’re buying U.S. stocks, it’s more manageable—but if you buy China stocks or Hong Kong stocks, the fees may jump to 1% or even 2%.

Discretionary accounts are suitable for people who don’t trade frequently, have simple investment needs, and are willing to hold long term. Convenience is a plus, but the pricing is indeed higher. If you want lower costs without the barriers being too high, you can also consider overseas brokers or U.S. stock CFDs—each has its own applicable scenarios.