Understanding Your Investment Advisory Agreement — A Plain-English Walkthrough
An investment advisory agreement isn't just a formality to get through before the real conversation starts — it's the document that defines exactly what you're entitled to, what you're paying for, and what recourse you have if things go wrong. Understanding what should actually be in it is worth the fifteen minutes it takes.
The Scope of Services Section — What You're Actually Buying
This section should clearly define what advice covers — which asset classes, whether it includes ongoing monitoring or is a one-time engagement, and whether implementation support (actually placing transactions on your behalf) is included or remains entirely your own responsibility. Vague scope language here is a common source of later disputes about what the adviser was actually meant to deliver.
The Fee Structure Section — Read This More Carefully Than Any Other Part
The agreement should state clearly whether you're being charged under the Assets Under Advice (AUA) mode or the Fixed Fee mode, the exact percentage or amount, whether GST is included or additional, and the payment frequency. SEBI's current framework caps fees under both modes — our companion article on IA fee structures explains exactly how these caps work, giving you a benchmark to check the agreement's figures against.
The Risk Profiling Acknowledgment
A properly built agreement references the risk-profiling exercise you completed before receiving any recommendations — confirming that advice is meant to be tailored to your documented risk profile, financial goals, and time horizon, rather than a generic recommendation. If your agreement doesn't reference this at all, that's worth asking about directly.
The Most Important Terms and Conditions (MITC) Reference
SEBI requires every IA to provide clients with a standardised MITC document alongside the advisory agreement — covering, among other things, the explicit statement that no returns can be guaranteed (covered in more depth in our companion article), the fee structure, and the grievance redressal mechanism available to you. Check that this document has actually been provided, not merely referenced without being attached.
The Conflict of Interest Disclosure
A properly drafted agreement discloses any material relationships the IA (or related parties) has with product providers or platforms that could create a conflict — our companion article on fiduciary duty explains why this disclosure is a core part of the IA's regulatory obligation, not an optional courtesy.
The Termination and Exit Clause
This section should specify how either party can end the relationship, any notice period required, what happens to fees already paid for a period not yet delivered, and — critically — what happens to your data and records once the relationship ends. Our companion article on fee refund and breakage rules covers exactly what SEBI's framework requires here.
The Grievance Redressal Section
A compliant agreement should reference the IA's internal complaint-handling contact, expected response timelines, and the escalation path through SCORES and the Online Dispute Resolution mechanism if a complaint isn't resolved directly — covered in full in our companion articles on both processes.
The Continuity Clause — What Happens If the IA's Business Changes
A well-drafted agreement, or at minimum the IA's broader client communication practice, should address what happens to the relationship if the IA's firm undergoes a change in ownership or ceases operating — our companion article covers exactly what SEBI's framework requires an IA to do in these situations, a useful benchmark against what your own agreement actually says.
What to Do If Your Agreement Is Missing Any of This
An agreement missing several of these elements isn't necessarily a sign of bad faith, but it is a legitimate reason to ask direct questions before signing — a properly compliant IA should be able to explain any gap or point you to where the missing information actually lives (often the separately provided MITC document).
How We Help
We help Investment Advisers draft and review advisory agreements and MITC documentation that are genuinely complete against SEBI's current requirements — reducing ambiguity for clients and closing gaps that can otherwise surface as disputes or compliance findings later. Our SEBI Intermediary Compliance practice can review your existing agreement templates or help you build them from scratch.
This article is for general informational purposes and does not constitute legal advice specific to any individual's agreement — please have your specific advisory agreement reviewed by a qualified professional before signing.