Sample Investment Advisor Agreement: What You Need to Know

An investment advisor agreement is a contract made between an investment advisor and their clients. It is a legal document that outlines the terms and conditions of the advisory relationship, including the investment philosophy, fees, and responsibilities of both parties involved.

If you are seeking financial advice or planning to become an investment advisor, it is crucial to understand the contents of an investment advisor agreement. In this article, we will discuss the essential information you need to know about a sample investment advisor agreement.

Investment Advisor Agreement: What is it?

An investment advisor agreement is a legal agreement between an investment advisor and their client, outlining the scope of services provided, fees charged for these services, and the terms and conditions of the advisory relationship. It lays out the responsibilities of the advisor and the client, as well as any limitations on the advisor`s authority.

There are two primary types of investment advisors agreements: discretionary and non-discretionary. A discretionary agreement gives the advisor full authority to make investment decisions on behalf of the client without prior approval. In contrast, a non-discretionary agreement requires the advisor to obtain specific approval from the client before making any investment decisions.

Investment Advisor Agreement Sections

Below are the essential sections of a sample investment advisor agreement:

1. Introduction

The introduction section outlines the purpose of the agreement, including the name and contact details of the advisor and the client.

2. Advisory Services

The advisory services section details the services provided by the advisor, including the types of securities in which they invest, the clients to whom they provide services, and the responsibilities of both the advisor and the client.

3. Fees

The fees section outlines the fees charged for the advisory services, including any billing schedule, how the fees are charged, and the compensation structure of the advisor.

4. Confidentiality

The confidentiality section outlines the confidentiality obligations of the advisor, including non-disclosure of confidential client information, and the penalties for breaching these obligations.

5. Termination

The termination section outlines the circumstances under which the agreement can be terminated, including mutual agreement, breach of the contract by one party, or the death or incapacity of the client.

6. Arbitration Clause

An arbitration clause is a provision in the agreement that requires the parties to resolve any disputes through arbitration instead of litigation.

Conclusion

An investment advisor agreement is a critical document that protects both the advisor and the client from misunderstandings and disputes. It outlines the specific terms and conditions of the advisory relationship, including the investment philosophy, fees, and responsibilities of both parties involved. As such, it is essential to fully understand every section of the agreement before signing it.

If you are seeking professional financial advice, make sure you choose a reputable advisor with a clear understanding of your investment goals and financial needs. Always read and understand the contents of the investment advisor agreement before signing it to ensure a mutually beneficial relationship between you and your advisor.