Financial Advisory Agreement Template for England and Wales
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What is a Financial Advisory Agreement?
A financial advisory agreement in England and Wales is a regulated contract between an FCA-authorised adviser and a client setting out the scope, type, and cost of investment advice. Since July 2023, all such agreements must comply with the FCA Consumer Duty, ensuring good client outcomes across suitability, value, and understanding. Independent and restricted advice must be clearly differentiated, and fees must be disclosed in cash terms.
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About the Financial Advisory Agreement
A Financial Advisory Agreement is a legally binding contract that establishes the professional relationship between you and your financial advisor. This document is governed by comprehensive federal securities laws including the Investment Advisers Act of 1940 and must meet strict regulatory standards set by the Securities and Exchange Commission (SEC).
When do you need this document?
You need a Financial Advisory Agreement whenever you engage professional investment advisory services. This includes situations where you hire a registered investment advisor for portfolio management, financial planning, or investment consultation services. The agreement is also required when establishing relationships with investment management firms, fee-based financial planners, or robo-advisory platforms. Additionally, you'll need this document when transitioning between advisory firms or updating existing advisory relationships to reflect changes in services or fee structures.
Key legal considerations
The agreement must clearly define the advisor's fiduciary obligations, which require them to act in your best interest at all times. Fee disclosure is critical and must include all compensation sources, including management fees, performance fees, and any third-party payments. The document should specify the scope of services, investment objectives, and risk tolerance assessments. Termination clauses must outline how either party can end the relationship and address asset custody arrangements. Privacy and confidentiality provisions are essential to protect your financial information, while dispute resolution mechanisms should specify arbitration or litigation procedures.
Legal requirements in United States
Under the Investment Advisers Act of 1940, registered investment advisors must provide clients with Form ADV Part 2, which serves as the disclosure brochure detailing the advisor's business practices, fees, and potential conflicts of interest. The agreement must comply with the Dodd-Frank Act's enhanced disclosure requirements and fiduciary standards. State-registered advisors must also meet additional state-specific requirements, which vary by jurisdiction. The Bank Secrecy Act and PATRIOT Act impose customer identification and anti-money laundering obligations on advisory firms. Additionally, the agreement must address SEC custody rules if the advisor has discretionary authority over client assets, and include proper disclosures regarding investment risks and market volatility as required by federal securities regulations.
GOVERNING LAW
Applicable law
This Financial Advisory Agreement is drafted to comply with England and Wales law. Key legislation includes:
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