Your financial objectives will determine the term of engagement. Mutually establish realistic expectations. The term could be six months, a year, two-years, or ongoing. Open and honest communication between client and practitioner are the hallmarks for establishing the term of engagement. This aspect of engaging in the financial planning process is an advisory services agreement is helpful. The agreement is a written contract between client and consultant discussing the rights and responsibilities of each party. It discloses in writing the roles and relationships for consumer protection. It is in essence a business contract between a business and consumer. The advisory services agreement is a written, plain English contract, preceded by a Firm Brochure with a Brochure Supplement (FORM ADV Part 2). The Brochure and supplement is a narrative in plain English that discloses the obligations of your advisor as a fiduciary including a full and truthful disclosure filed with the state of domicile and other governmental agencies where the adviser is accountable. The brochure includes:
• a cover page,
• material changes from the previous annual update,
• a table of contents,
• discussion of the advisory business,
• fees and compensation,
• types of clients served,
• methods of analysis and strategies and risks,
• disciplinary information,
• other financial activities and affiliations,
• code of ethics,
• brokerage practices,
• review of accounts,
• client referrals and other compensation,
• investment discretion,
• voting securities,
• financial information,
• and other requirements for state-registered advisers.
Both the brochure and the contract are free to clients. The consultation for discussing the brochure, supplement, and contract are also a complementary service to help clients understand the fiduciary relationship and the term of the engagement.
TIPS: Ask questions. Receive patient, honest, and clear answers. Take at least 24 hours to review the discussion before signing the contract. Understand the importance of a fiduciary relationship. Your adviser has the duty of loyalty to you.
Chris Bryant is an American financial advisor.