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. 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 investment management agreement expired on February 28, 2014 and KBR no longer has an investment manager of the company on the same date. 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 customer, some of the basic conditions that you wish to keep in mind are: the agreement should stipulate that the advisor will provide 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 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. 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 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 describe how the advisor will act assets on the account as soon as a decision is made to buy or sell.