Advisory Contract Requirements
Written, specific about fees, no assignment without consent, no waiver of rights.
What is Advisory Contract Requirements?
Under state rules the contract must be in writing and state the services, the term, the fee or its formula, how prepaid fees are refunded on termination, and whether the adviser has discretion. It may not allow assignment without the client's consent, may not provide for a performance fee except as permitted, and must require an adviser organized as a partnership to notify clients of changes in its membership.
Advisory Contract Requirements: a worked example
A contract saying only 'fees as agreed' fails - it must state the fee or the formula.
More terms in Ethics & Fiduciary Obligations
Form ADV Part 2 Brochure Delivery
Deliver 48 hours before the contract, or at signing with a 5-business-day exit.
Assignment of an Advisory Contract
Transferring a client contract requires the client's consent - including by change of control.
Performance-Based Fees & Qualified Clients
Allowed only for qualified clients: $1.4M with the adviser or $2.7M net worth (from June 29, 2026).
Prepaid Fees & Financial Requirements
Prepayment over $500, six months ahead, triggers net worth and balance sheet rules.
Custody
Holding, or having authority to obtain, client funds or securities.
Discretionary Authority
Deciding the asset, the amount, or buy versus sell - without asking first.
Third-Party Trading Authorization
Anyone other than the owner needs written authority to trade the account.
Principal Transactions by Advisers
Selling to or buying from a client for the adviser's own account needs consent each time.