Discretionary Investment Advisory Agreement Template for Canada

A Discretionary Investment Advisory Agreement is a legal contract that grants an investment adviser the authority to make investment decisions on your behalf without requiring your approval for each transaction. This document establishes the professional relationship between you and a registered investment adviser, outlining the scope of services, investment parameters, and regulatory obligations that govern discretionary investment management in Canada.

When do you need this document?

You need this agreement when engaging a professional investment adviser to manage your portfolio with discretionary authority. This typically occurs when you want professional investment management but prefer not to be involved in day-to-day trading decisions. High-net-worth individuals often use these agreements when working with private wealth managers, while corporations may need them when establishing investment management relationships for surplus funds. Pension funds and trusts require these agreements when appointing external portfolio managers, and family offices use them when delegating investment authority to professional advisers. The agreement is also necessary when transitioning from advisory-only services to discretionary management with your existing investment firm.

Key legal considerations

The investment guidelines section is critical as it defines your risk tolerance, asset allocation parameters, and any investment restrictions you want to impose. The fee structure must be clearly outlined, including management fees, performance fees, and any additional charges, with full disclosure of how fees are calculated and collected. Conflict of interest provisions are essential, requiring the adviser to disclose any potential conflicts and how they will be managed. The agreement must include detailed reporting obligations, specifying when and how you will receive portfolio updates and performance reports. Termination clauses should clearly outline how either party can end the relationship and the process for transferring assets. Privacy and confidentiality provisions must comply with Canadian privacy legislation, while anti-money laundering clauses ensure compliance with federal requirements.

Legal requirements in Canada

Under National Instrument 31-103, investment advisers must be properly registered with provincial securities commissions and meet specific proficiency and conduct standards. The agreement must include mandatory disclosures about the adviser's registration status, business practices, and any disciplinary history. Know Your Client (KYC) requirements mandate that advisers collect and verify detailed information about your financial situation, investment knowledge, and objectives before providing discretionary services. The agreement must comply with the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, requiring identity verification and ongoing monitoring procedures. Provincial Securities Acts impose fiduciary duties on investment advisers, requiring them to act in your best interests at all times. Client relationship management requirements under NI 31-103 mandate clear communication about fees, risks, and conflicts of interest, with specific disclosure documents that must be provided before services begin.