Discretionary Investment Advisory Agreement for the United Kingdom

Discretionary Investment Advisory Agreement Template for England and Wales

A Discretionary Investment Advisory Agreement is a legally binding contract governed by the laws of England and Wales, establishing the terms under which an FCA-regulated investment manager provides discretionary investment management services to a client. The agreement details investment objectives, risk parameters, fees, reporting requirements, and regulatory obligations in accordance with UK financial services legislation, including FSMA 2000 and FCA regulations.

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What is a Discretionary Investment Advisory Agreement?

The Discretionary Investment Advisory Agreement is essential for establishing professional investment management relationships in the UK financial services sector. It is used when a client wishes to delegate investment decision-making authority to a professional manager regulated by the FCA. The agreement, governed by English and Welsh law, comprehensively covers investment strategy, risk management, regulatory compliance, reporting obligations, and fee structures. It ensures alignment with key legislation including FSMA 2000, MiFID II requirements, and FCA regulations while protecting both parties' interests.

What sections should be included in a Discretionary Investment Advisory Agreement?

1. Parties: Identification of the investment manager and client, including regulatory status and contact details

2. Background: Context of the agreement and basic understanding between parties

3. Definitions: Key terms used throughout the agreement

4. Appointment and Authority: Scope of discretionary authority granted to the manager

5. Investment Objectives and Restrictions: Agreed investment strategy, risk profile, and any specific limitations

6. Services: Detailed description of investment services to be provided

7. Fees and Charges: Fee structure, calculation methods, and payment terms

8. Reporting and Valuations: Frequency and content of reports and valuations

9. Client Obligations: Client responsibilities and information requirements

10. Risk Disclosures: Mandatory risk warnings and acknowledgments

11. Termination: Circumstances and process for ending the agreement

What sections are optional to include in a Discretionary Investment Advisory Agreement?

1. Custody Arrangements: Details of custody services if provided - include when custody services are part of the offering

2. Foreign Exchange Services: Terms for currency conversion and FX services - include when dealing with multiple currencies

3. Electronic Services: Terms for online access and digital services - include when providing online platform access

4. Additional Services: Terms for any supplementary services - include when offering services beyond core investment management

What schedules should be included in a Discretionary Investment Advisory Agreement?

1. Investment Guidelines: Detailed investment parameters and restrictions

2. Fee Schedule: Detailed breakdown of all fees and charges

3. Risk Disclosure Statement: Comprehensive risk warnings and explanations

4. Authorized Persons: List of individuals authorized to give instructions

5. Client Categorization Notice: FCA client classification documentation

6. Execution Policy: Best execution policy summary

7. Conflicts Policy: Summary of conflicts of interest policy

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Cost

Free to use

Relevant legal definitions

Clauses

Relevant Industries

Financial Services
Private Banking
Asset Management
Family Offices

Relevant Teams

Investment Management
Compliance
Legal
Operations
Client Services
Risk Management

Relevant Roles

Investment Manager
Portfolio Manager
Compliance Officer
Relationship Manager
Chief Investment Officer
Legal Counsel
Risk Manager

Industries

Financial Services and Markets Act 2000 (FSMA): Primary legislation governing financial services regulation in the UK, establishing the regulatory framework and the Financial Conduct Authority (FCA)

Financial Services Act 2012: Reformed the UK financial regulatory framework, including amendments to FSMA and establishing new regulatory bodies

Financial Services and Markets Act 2000 (Regulated Activities) Order 2001: Defines which activities require FCA authorization and regulation

FCA Handbook - COBS: Conduct of Business Sourcebook - Details specific requirements for how firms should interact with clients and conduct business

FCA Handbook - CASS: Client Assets Sourcebook - Rules for protecting and handling client money and assets

FCA Handbook - SYSC: Systems and Controls - Requirements for firms' internal organization and risk management

FCA Handbook - PRIN: Principles for Businesses - Core principles that firms must follow in conducting regulated activities

UK MiFID II: Retained EU law governing investment services, including client categorization, best execution, and reporting requirements

UK Market Abuse Regulation: Retained EU law addressing market abuse, insider dealing, and market manipulation

Money Laundering Regulations 2017: Requirements for anti-money laundering procedures and customer due diligence

Proceeds of Crime Act 2002: Legislation covering money laundering offenses and reporting obligations

Consumer Rights Act 2015: Key consumer protection legislation governing contracts for goods and services

Unfair Contract Terms Act 1977: Controls unfair terms in contracts, particularly regarding limitation of liability

Consumer Protection from Unfair Trading Regulations 2008: Prohibits unfair commercial practices between traders and consumers

UK GDPR: Post-Brexit data protection regulation implementing EU GDPR principles into UK law

Data Protection Act 2018: UK's implementation of data protection requirements, working alongside UK GDPR

Common Law Contract Principles: Traditional legal principles governing contract formation, interpretation, and enforcement

Misrepresentation Act 1967: Governs false statements made during contract negotiation and provides remedies

Principles of Equity and Fiduciary Duties: Legal principles governing relationships of trust and confidence, particularly relevant for investment advisers

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What is a Discretionary Investment Advisory Agreement?

What sections should be included in a Discretionary Investment Advisory Agreement?

What sections are optional to include in a Discretionary Investment Advisory Agreement?

What schedules should be included in a Discretionary Investment Advisory Agreement?

Authors

Alex Denne

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