RIA Investment Management Agreement: What You Need to Know

As a registered investment advisor (RIA), creating an investment management agreement (IMA) with your clients is a vital part of your business. An IMA outlines the scope of your investment management services and ensures that both you and your clients are on the same page when it comes to working together. In this article, we will dive into the key components of an IMA and why it is essential to have one in place.

What is an Investment Management Agreement?

An investment management agreement is a legal document that outlines the terms and conditions of the relationship between an RIA and their client. The agreement is a contract between the RIA and the client that sets out the services provided, the fees charged, and the responsibilities of both parties.

Key Components of an Investment Management Agreement

1. Services Provided

The IMA should define the services provided by the RIA. This could include investment advisory services, financial planning, or other related services. The agreement should also detail the specific investment strategies that the RIA will be implementing on behalf of the client.

2. Fees and Compensation

The IMA should detail the fees charged by the RIA for their services. This could include asset-based fees, performance-based fees, or hourly fees. The agreement should also detail how the RIA will be compensated for their services.

3. Client Duties and Responsibilities

The IMA should also outline the responsibilities of the client. This could include providing the RIA with information about their financial situation, keeping the RIA informed of any changes, and following the recommendations of the RIA.

4. Duration and Termination

The IMA should specify the duration of the agreement and how it can be terminated. This could include termination by either party, termination upon reaching specific goals, or termination upon breach of contract.

Why is an Investment Management Agreement Important for RIAs?

An Investment Management Agreement is essential for RIAs for several reasons. First, it outlines the scope of services and ensures that both the RIA and the client are on the same page. This can help to avoid any misunderstandings down the road.

Second, an IMA provides clarity around fees and compensation, which can help to avoid any disputes or confusion. It also sets clear expectations around compensation, which can improve client retention and satisfaction.

Finally, an IMA can help to protect the RIA from legal action. By outlining the specific terms and conditions of the relationship, an IMA can help to avoid any claims of breach of contract or negligence.

In Conclusion

An Investment Management Agreement is a critical document for RIAs and their clients. It outlines the scope of services, fees, and responsibilities, and protects both parties from any legal action. If you are an RIA, it is essential to have an IMA in place with each of your clients. If you are a client of an RIA, make sure that you fully understand the terms and conditions of your IMA before signing.