Financial Advisory Agreement Template for the United States

A Financial Advisory Agreement is a legally binding contract that establishes the professional relationship between you and your financial advisor. Under United States federal law, this agreement must comply with strict regulatory requirements to protect your interests and ensure proper disclosure of all material information affecting your investment decisions.

When do you need this document?

You need a Financial Advisory Agreement whenever you engage a professional investment advisor for ongoing financial guidance. This includes situations where you're working with registered investment advisors for portfolio management, retirement planning, or comprehensive financial planning services. The agreement is also required when establishing relationships with fee-based advisors who provide discretionary investment management or when transferring assets to advisory accounts. If you're a high-net-worth individual seeking personalized investment strategies or a business owner requiring fiduciary investment oversight, this document becomes essential for legal protection and regulatory compliance.

Key legal considerations

The agreement must clearly define the advisor's fiduciary obligations under federal law, including the duty of care and duty of loyalty owed to you as the client. Fee disclosure requirements are particularly critical, as the document must specify all compensation methods, including management fees, performance fees, and any third-party payments the advisor receives. The scope of services section should detail whether the advisor has discretionary authority over your investments and what types of securities or investment strategies may be employed. Risk disclosure provisions must be comprehensive, outlining potential conflicts of interest and material risks associated with recommended investment approaches. Termination clauses should specify how the relationship can be ended by either party and how assets will be handled upon termination.

Legal requirements in United States

Under the Investment Advisers Act of 1940, registered investment advisors must provide you with Form ADV Part 2, which serves as a disclosure brochure detailing the advisor's business practices, fees, and potential conflicts of interest. The agreement must comply with SEC regulations regarding custody of client assets and requires specific language if the advisor will have custody or discretionary authority over your funds. State-registered advisors must follow additional state-specific requirements, which vary by jurisdiction but often include enhanced disclosure obligations and bonding requirements. The Dodd-Frank Act imposes additional fiduciary standards, requiring advisors to act in your best interest at all times. Anti-money laundering provisions under the Bank Secrecy Act and PATRIOT Act require customer identification procedures and ongoing monitoring obligations that must be reflected in the agreement's terms and conditions.