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 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.
The agreement should designate the custodian who holds the assets in the account. The custodian should be a serious financial organization, for example. B a large bank or brokerage company, and be independent of the advisor (again to avoid the madoff situation). If the advisor recommends a particular director, he or she must explain the basis of his or her recommendation (for example. B lower costs, better services or the advisor`s familiarity with the trustee`s staff and systems). The advisor should also be willing to work with the administrator you are currently using or prefer in another way. The fees due to the advisor are defined in the agreement or in an appendix. As a general rule, fees are shown as a percentage of the account`s assets (for example.
B 1% per year) and are due quarterly in advance or late. Although consultants have standard pricing plans, fees can be negotiated. For example, the advisor should be willing to charge a lower fee for a larger account and for easier-to-manage parts of the account (for example. B, bonds and cash). In addition to the advisor`s fee, you are responsible for brokerage commissions and fees and expenses of the custodian and other service providers (unless it is a “Wrap” account).