Break Away From The Pack

What to include in an investment advisory agreement

On Behalf of | Mar 8, 2024 | RIA Formation |

Starting as an independent registered investment advisor (RIA) can be challenging, but it can also be rewarding. This path’s success can depend on various factors, including the proper formation of the business and having solid relationships with new or old clients who need help managing their finances. These connections can be valuable, especially after recently breaking away and starting the business.

During this time, it could be crucial to pay close attention to the details of the investment advisory agreements. These documents should include vital information to protect both the advisor and the client, such as the following:

  • The clause indicating the agreement and its terms
  • The services the advisor will provide to the client, clearly stating both inclusions and exclusions
  • Detailed description of compensation and other accompanying costs
  • The client’s accountabilities that are necessary for the advisor to deliver their services properly
  • Measures and policies required to secure the client’s privacy
  • List of assets that will be under the advisor’s management and scenarios that may pose conflicts of interest
  • Other necessities based on the agreement’s features, such as authorizations and enforceability

These components are often essential to an investment advisory agreement but may vary depending on the client’s needs and the asset types they intend to include in the contract.

Creating comprehensive and effective agreements

Having a few agreement templates for the business could be insufficient, especially when offering a wide range of services. Each service can require different terms and conditions, requiring the help of a legal professional. Consider consulting an attorney when creating these advisory agreements. Doing so can help protect the involved parties by keeping contracts legally sound, which helps establish client-advisor relationships that could flourish over time.