What is a Financial Advisory Services Agreement Template?
The Financial Advisory Services Agreement Template is designed for use in the United States when establishing professional relationships between financial advisors and their clients. This document is essential for compliance with SEC regulations, state securities laws, and fiduciary requirements. It covers crucial elements including service scope, fee structures, investment authority, and risk disclosures. The agreement is particularly important in today's complex regulatory environment, where clear documentation of advisor-client relationships is mandatory under various federal and state laws. It serves as a comprehensive framework for protecting both advisor and client interests while ensuring regulatory compliance.
About the Financial Advisory Services Agreement Template
A Financial Advisory Services Agreement is a legally binding contract that establishes the professional relationship between a financial advisor or advisory firm and their client. This document is crucial for compliance with federal securities laws and serves as the foundation for all advisory services provided under United States regulations.
When do you need this document?
You need this agreement whenever you're engaging a financial advisor for investment advice, portfolio management, or financial planning services. It's required before any advisory relationship begins, whether you're working with an independent advisor, a registered investment adviser (RIA), or an advisory firm. The document is essential when transferring assets to an advisor's management, establishing ongoing financial planning relationships, or when advisors are providing discretionary investment management services. Federal law mandates that registered investment advisers provide clients with clear documentation of their services and compensation structure before or at the time of entering into any advisory contract.
Key legal considerations
The agreement must clearly establish the advisor's fiduciary duty to act in your best interest, as required under the Investment Advisers Act of 1940. Critical clauses include the scope of services, fee structure transparency, investment authority levels, and performance benchmarks. The document should specify whether the advisor has discretionary authority to make investment decisions without prior approval, or if they're providing non-discretionary advice only. Risk disclosure provisions are mandatory, outlining potential conflicts of interest, market risks, and the advisor's disciplinary history. Termination clauses must comply with SEC requirements, typically allowing either party to terminate with reasonable notice. The agreement should also address custody arrangements, as advisors generally cannot take physical possession of client funds under federal regulations.
Legal requirements in United States
Under the Investment Advisers Act of 1940, all registered investment advisers must provide clients with Form ADV Part 2, which serves as a disclosure brochure detailing the advisor's services, fees, and conflicts of interest. The agreement must comply with the Securities Exchange Act of 1934 regarding broker-dealer activities and the Dodd-Frank Act's enhanced fiduciary standards. State-registered advisors must follow additional state securities laws and disclosure requirements. The Bank Secrecy Act and USA PATRIOT Act require customer identification procedures and anti-money laundering compliance measures to be incorporated into the advisory relationship. Fee disclosure must meet specific transparency requirements, and any performance-based compensation arrangements must comply with strict federal limitations. The agreement must also address record-keeping obligations, as advisors are required to maintain detailed records of all client communications and transactions for SEC examination purposes.
Governing law
Applicable law
This Financial Advisory Services Agreement Template is drafted to comply with United States law. Key legislation includes:
- Investment Advisers Act of 1940: Primary federal regulation governing investment advisers, requiring registration, disclosure, and establishing fiduciary duties to clients
- Securities Exchange Act of 1934: Fundamental securities law governing securities transactions and requiring registration of broker-dealers
- Dodd-Frank Act: Comprehensive financial reform law affecting advisory services, including heightened reporting requirements and fiduciary standards
- Investment Company Act of 1940: Regulates the organization and operation of investment companies and their relationship with advisory firms
- Bank Secrecy Act: Requires financial institutions to assist government agencies in detecting and preventing money laundering
- USA PATRIOT Act: Extends BSA requirements and establishes customer identification programs for financial institutions
- FINRA Regulations: Self-regulatory organization rules governing broker-dealers and registered representatives
- Blue Sky Laws: State-specific securities regulations governing the offering and sale of securities within each state
- State Investment Adviser Requirements: State-specific registration and compliance requirements for investment advisers managing under $110 million
- Gramm-Leach-Bliley Act: Federal law requiring financial institutions to explain information-sharing practices and protect sensitive data
- CFPB Regulations: Consumer Financial Protection Bureau rules protecting consumers in financial transactions
- FTC Regulations: Federal Trade Commission rules governing unfair or deceptive business practices
- CFA Institute Code of Ethics: Professional standards for chartered financial analysts including integrity, competence, and client priority
- CFP Board Standards: Professional standards for certified financial planners including fiduciary duty and ethical conduct
