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 agreement should describe how the advisor will act assets on the account as soon as a decision is made to buy or sell. If the advisor acts through a related broker, you should get some certainty that you will get the best total price. The agreement will often allow the consultant to obtain research or brokerage services from the brokers he uses. This is permissible, but you should be aware that the advisor will have a financial interest in using these brokers. You can also order the advisor to act through a particular broker, but this can increase your trading fees. Investment management agreements generally provide that the advisor is not held liable to the client if he has no intentional misconduct, bad faith, simple or serious negligence and/or breach of the duty of loyalty.
Some agreements may also provide that the client compensates the advisor for third-party claims. While you should try to reduce these types of rules, advisors tend to resist significant changes. In addition, consultants are not allowed to limit debts they would otherwise have under securities legislation. 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 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 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. The agreement should specify the nature and frequency of written and oral reports.