An investment advisory agreement is a crucial legal document between a financial advisor and client. It outlines the rights, responsibilities and services provided by the advisor. When creating an agreement, both parties must ensure it protects their interests and aligns with regulations. This article will explore key elements to include in an investment advisory agreement template doc.
Defining Advisory Services Offered
The agreement should clearly define the investment advisory services provided, such as financial planning, portfolio management, and account monitoring. Outline the strategies used, such as fundamental analysis or technical analysis. Specify the types of securities traded, like stocks, bonds, ETFs. Clarify any account minimums and if investment authority is discretionary or non-discretionary.
Disclosing Fee Structure and Billing
The fee structure must be disclosed upfront, including whether fees are fixed, hourly, asset-based, performance-based or other models. Define the fee percentage or hourly rate. Explain how and when clients will be billed – monthly, quarterly, annually. Ensure fees comply with securities regulations.
Specifying Client Reporting and Communications
Detail what regular reporting the advisor will provide, like monthly statements, quarterly performance reviews, annual tax documents. Specify communication methods used – email, phone, in-person meetings. Outline advisor’s availability for answering questions.
Clarifying Advisory Role and Client Responsibilities
The agreement should explain the advisor is not the client’s legal representative and does not have power of attorney over accounts. The client retains full ownership. The client must provide accurate information the advisor relies on. The client can accept or reject advisor recommendations.
Defining Confidentiality and Privacy Standards
Include confidentiality clauses restricting the advisor from sharing private client information. Exceptions may include legal/regulatory requirements. Guarantee advisor will safeguard sensitive documents and data. Give details on use of email, cloud storage, file sharing platforms.
An investment advisory agreement template is vital for both advisors and clients. It defines services, fees, reporting and communications while also protecting interests through confidentiality and clarifying responsibilities. Advisors should have experienced legal counsel review any agreement template before use.