How to Develop a Financial Advisor Contract For Your Clients

If you’re a financial advisor, you know that having a contract is essential to protect both you and your clients. But what should a financial advisor contract include?

This article will go over the critical components of a financial advisor contract so that you can create one that works for your business.

The Importance of Financial Advisor Contracts

A financial advisor contract is a legally binding agreement between you and your client that outlines the terms of your relationship. This contract protects both parties by clearly outlining the services, compensation, and other important details.

Financial advisor contracts help avoid misunderstandings and provide a clear path forward if there are disagreements. If you don’t have a contract in place, then you may find yourself in a difficult situation if something goes wrong.

Essential Components of Financial Advisor Contracts

When you’re creating a financial advisor contract, certain essential components should be included:

• Terms of agreement: this is where you’ll outline the terms of your relationship with the client. This section should include the length of the contract, any renewals or termination clauses, and how disputes will be handled.
• Description of services: this section should describe the financial services you’ll provide to the client. Be as specific as possible so that there are no misunderstandings about what is included in your services.
• Details of compensation: this is where you’ll outline how you will be compensated for your services. This may include a monthly fee, commission, or a combination of both. Be sure to include any details about how and when you will be paid.
• Assets that will be managed: if you’ll be managing any assets for the client, then this should be stated in the contract. This includes stocks, bonds, and other financial assets.
• Renewal and termination terms: you’ll also want to include terms for renewing or terminating the contract. This can be helpful if either party wants to end the relationship.
• Risks and disclosures: this is where you’ll disclose any risks that are associated with the financial services you’re providing. This helps to protect you from liability if something goes wrong.
• Miscellaneous terms: finally, you’ll want to include any other miscellaneous terms that may apply to your relationship. This can include confidentiality clauses, non-compete clauses, and more.
• Signature lines: once both parties have signed the contract, it will be legally binding. Be sure to include signature lines for both you and the client.

Example Contracts To Get You Started

Now that you know what should be included in a financial advisor contract, let’s look at what an example financial advisor contract looks like.

Terms of Agreement

This financial advisor contract (“Agreement”) is made and entered into on the date of signature by and between:

ADVISOR’S NAME, a financial advisor located at ADDRESS (“Advisor”), and CLIENT’S NAME, an individual with a financial interest in the subject matter of this Agreement (“Client”).

For the purpose of this Agreement, the Advisor and Client may be referred to herein singularly as a “Party” or collectively as the “Parties.”

Description of Services

Advisor will provide financial consulting and advice to Client. This may include, but is not limited to, the following services:

• Review of financial statements
• Development of financial goals
• Recommendations on financial strategy
• Implementation of financial plan

Client understands that Advisor is not a registered investment advisor or broker-dealer and does not provide investing or securities recommendations.

Details of Compensation

In exchange for the services provided by Advisor, Client shall pay Advisor an hourly rate of $X per hour, with a minimum commitment of X hours per month. Payment shall be made monthly in advance by check or bank transfer. If payments are more than X days late, Advisor reserves the right to terminate this Agreement.

Assets That Will Be Managed

Client hereby appoints Advisor as Client’s financial consultant and grants Advisor authority to review Client’s financial statements and make recommendations on financial strategy. This includes, but is not limited to, the following financial assets:

• Bank accounts
• Investment accounts
• Retirement accounts
• Insurance policies

Risks And Disclosures

Advisor is not a registered investment advisor or broker-dealer and does not provide investing or securities recommendations. As such, the Advisor will not be held liable for any investment losses that Client may experience.

Advisor is also not responsible for any taxes owed by Client as a result of the financial advice provided. It is the Client’s responsibility to consult with a tax advisor to determine the tax implications of any financial decisions made.

Advisor is not responsible for any losses incurred by Client as a result of implementing Advisor’s recommendations.

Advisor will not be liable for any indirect, special, or consequential damages resulting from the use of Advisor’s services, even if Advisor has been advised of the possibility of such damages.

This Agreement does not create a fiduciary relationship between the Parties.

Miscellaneous Terms

• Confidentiality: Any information that is marked as confidential or should reasonably be considered confidential shall remain the property of the disclosing Party and may not be used or disclosed by the receiving Party without prior written consent from the disclosing Party, except as may be required by law.
• Non-Compete: During the term of this Agreement and for a period of X months after termination or expiration of this Agreement, Client agrees not to engage in any business activity that competes with the Advisor’s financial consulting services.
• Term and Termination: This Agreement shall begin on the date of signature and continue for X months (the “Initial Term”). After the Initial Term, this Agreement shall automatically renew for additional X-month terms (each a “Renewal Term”, together with the Initial Term, the “Term”) unless either Party provides written notice of non-renewal to the other Party at least 30 days prior to the end of the then-current Term.

Either Party may terminate this Agreement at any time for any reason by providing written notice to the other Party.

Upon termination of this Agreement, Advisor will promptly deliver to Client all documents and other items in Advisor’s possession that belong to Client.

• Severability: If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then such provision shall be interpreted in a manner consistent with applicable law to reflect, as nearly as possible, the original intentions of the Parties, and the remaining provisions shall remain in full force and effect.
• Waiver: The failure of either Party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that Party’s right to subsequently enforce and compel strict compliance with every provision of this Agreement.
• Governing Law: This Agreement shall be governed by the laws of the State of X without regard to its conflict of law provisions.
• Dispute Resolution: In the event of any dispute between the Parties arising out of or relating to this Agreement, the Parties agree first to attempt to resolve the matter through mediation. If mediation is unsuccessful, the Parties agree to submit the matter to binding arbitration following the rules of the American Arbitration Association.