An investment advisory contract is a written agreement between an investor and an investment advisor. It outlines the terms and conditions of the relationship between the two parties. The contract serves as a legal document that ensures both the investor and the investment advisor understand their roles and responsibilities. But what exactly can be included in an investment advisory contract? In this article, we’ll highlight some of the important elements that should be included in an investment advisory contract.
Services and Fees
The investment advisory contract should clearly state the services that the investment advisor will provide to the investor. This includes investment advice, portfolio management, and reporting. Additionally, the fees charged by the investment advisor should be clearly stated. This includes both the management fees charged on the assets under management and any additional fees for other services provided.
Duty of Care
The investment advisor has a duty of care to act in the best interest of the investor. The contract should clearly state that the investment advisor will act in the best interest of the investor and will not engage in any activities that could harm the investor. This includes avoiding conflicts of interest and disclosing any potential conflicts to the investor.
The investment advisory contract should outline the investor’s investment objectives, risk tolerance, and investment time horizon. This information will help the investment advisor develop an appropriate investment strategy that aligns with the investor’s goals.
The investment advisory contract may also include investment restrictions that the investor wants the investment advisor to adhere to. For example, the investor may not want the investment advisor to invest in certain types of securities or industries.
The investment advisory contract should include a termination clause that outlines the circumstances under which either party can terminate the agreement. This may include a notice period, fees for early termination, and the process for transferring assets.
Confidentiality and Privacy
The investment advisory contract should outline the confidentiality and privacy policies of the investment advisor. This includes how the investment advisor will handle the investor’s personal information and financial data.
An investment advisory contract is an important document that outlines the terms and conditions of the relationship between an investor and an investment advisor. It should clearly state the services provided, fees charged, duty of care, investment objectives, investment restrictions, termination clause, and confidentiality and privacy policies. By including these important elements in the contract, both the investor and the investment advisor can have a clear understanding of their roles and responsibilities, and can work together to achieve the investor’s financial goals.