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The agreement should consist of whether you or the advisor is competent for non-voting rights regarding the securities on the account. Some councillors do not like to elect substitutes because of the administrative burden. However, proxies can be important (for example. B a vote on an upcoming acquisition) and the advisor is often in a better position to assess the issues and ensure that your vote is recorded on time. For similar reasons, you may also require the advisor to bring a class action on your behalf. Agreements between an investment advisor and his client will be translated into an investment management agreement. While the advisor usually announces his or her own form of agreement, the client must make certain decisions, can negotiate certain points and must in any case understand the fundamental terms of the agreement. If you are the client, some of the basic conditions you must meet are: consultants often invest all or part of their accounts in investment funds, hedge funds, bank funds and other bundled vehicles. These vehicles can be managed by an unrelated consultant or manager.

Consultants can also enter into contracts with unrelated managers to invest all or part of your assets as a separate account. All of these arrangements support their own expenses, which are redirected to your account. You should understand the magnitude and structure of these expenses and check whether the advisory fees are properly offset by the fees paid to the administrator of the bundled vehicle or to a separate account. You should also be satisfied with the consultant`s diligence on all unrelated managers (to avoid the Madoff situation). The contract should provide that you can terminate it at any time or relatively quickly (z.B 30 days) without penalty. If you are dissatisfied with the counsellor, you should be able to terminate the relationship without incurring additional costs. The agreement should stipulate that the advisor provides his services in accordance with all laws and regulations. The agreement may also specify specific requirements, such as the registration of the advisor under the Federal Investment Advisors Act 1940 or under state law. The agreement should specify the nature and frequency of written and oral reports. Reports are generally quarterly and should include general market conditions, all account activity, outstanding account assets and account performance from relevant repositories.

The agreement should also provide for additional reports on appropriate request. The agreement gives the advisor discretionary or non-discretionary powers. With discretion, the advisor can create your account without consulting you beforehand. In the case of non-discretionary authority, the advisor must obtain your prior approval for each transaction. For both types of powers, the agreement should clearly state which assets should be managed. This is usually done by reference to a particular account or an account held in your name with a particular custodian. The agreement or annex to the agreement should include investment guidelines under which the account is managed. These guidelines should not only define the account`s investment objective (for example. B the valuation of capital), but also all investment allocations (. B for example, a target of 60% equity and 40% debt) and investment restrictions (for example, no more.

B of 20% in foreign securities, only investment degree debts, no derivatives). You would like to discuss with the advisor the initial directions that you must follow in the current circumstances and risk tolerances, and review these guidelines on a regular basis. Investment rules are the primary means of monitoring the consultant`s activities, so you should make sure they are clear and comfortable with them.

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