New Financial Advisor Client? 5 Documents to Know About

Starting a relationship with a financial advisor involves more than just a handshake. Defining how your arrangement will function, both operationally and ethically, you’ll also receive several documents to review or sign. As a client, knowing what to expect beforehand can help you feel more confident and in control from day one.

So, what paperwork should be on your radar as a new client? In this article, we’ll break down five important documents you’re likely to encounter. We’ll explain what they are, why they matter, and how they support a productive advisor-client relationship.

1. Investment Advisory Agreement

The investment advisory agreement (IAA) is a foundational document that a financial advisor will ask you to sign before the start of your relationship. This agreement must be in place before a professional can provide advice or manage your accounts or assets.

At its core, the agreement outlines the scope of the services you’ll receive, including:

• What your advisor is responsible for.
• How the firm charges fees.
• Legal terms for the advisor-client relationship.

While the language may vary depending on the firm, most agreements also clarify whether your advisor has discretionary authority (meaning they can make investment decisions on your behalf) or if you must approve each transaction (i.e., non-discretionary management). IAAs also often include details about termination policies, reporting schedules, and disclosure of possible conflicts of interest.

As a client, you must review this agreement carefully. Not only does it establish what your advisor will (and won’t) do, but it also breaks down your responsibilities and how the relationship may end.

This document is typically required for SEC- or state-registered investment advisors who operate under a fiduciary standard. While the format may vary, the purpose is the same: to ensure that both parties understand their rights, obligations, and expectations from the outset.

2. Form ADV Part 2A

The Form ADV Part 2A is a disclosure document that registered investment advisor (RIA) firms are required to produce under SEC and state regulations. It clearly explains the firm’s business practices, including the services it offers, its fee structure(s), and any potential conflicts of interest. Think of it as a formal but accessible overview of how the firm operates.

Whenever you’re considering working with a financial advisor, reviewing their Form ADV Part 2A is smart. It’s typically available on the firm’s website or through the SEC’s Investment Adviser Public Disclosure (IAPD) database.

Below is a breakdown of the sections you’ll find in a company’s Form ADV Part 2A:

• Advisory Business. This provides an overview of the firm’s services (e.g., financial planning or investment management), as well as account types and what to expect.
• Types of Clients. This section indicates the firm’s typical clientele (e.g., individuals, high-net-worth individuals, institutions) and, if applicable, the minimum account size requirements for becoming a client.
• Fees and Compensation. This breaks down what the firm charges for its services, how pay schedules work, and what factors drive advisor compensation.
• Methods of Analysis. This details the firm’s investment approach or philosophy, including risk management tactics, types of securities, and monitoring.
• Code of Ethics. This outlines the firm’s standards for professional conduct and its handling of conflicts of interest.

RIA brochures are typically updated yearly, reflecting any changes to the above. It’s important to review this to be as informed as possible on what you’re signing up for as a potential client. If you’re beginning to work with or research a firm, it’s wise to read this ahead of time and bring any questions you have to your initial meeting.

3. Privacy Policy Notice

Another important document to keep top of mind is the privacy policy notice. According to the Federal Trade Commission (FTC), the Gramm-Leach-Bliley Act requires financial institutions, including those offering financial advice or investment management, to disclose how they collect and manage your personal information.

As an advisory client, you should receive this notice at the start and at least once annually. A typical one, such as this example from Vanguard, will outline:

• The personal information the firm collects from you (email, phone number, banking information, Social Security number, etc.).
• How the firm uses that information (processing payments, sending updates, marketing, etc.).
• How you can opt out.
• Methodology for protecting your information.

You’re also typically able to access this information on your financial advisor firm’s website. Most will have a link to it present in the footer, allowing you to reference it at any time.

4. Custodial Account Paperwork

When you work with a financial advisor, a third-party custodian may hold your investments. This is an external financial institution that contains and safeguards your assets. A key responsibility of an RIA firm, however, is to provide you with custodial account paperwork outlining this arrangement and how it works.

During your onboarding process with an advisory firm, you’ll need to complete paperwork regarding to a custodial arrangement. This may include:

• Account applications for taxable or retirement accounts.
• Transfer forms for moving assets from other institutions.
• Beneficiary designation forms.
• Agreements for online access or e-delivery of statements.

These documents help ensure your accounts are properly set up and your assets are correctly titled and tracked. While your advisor may handle much of this process behind the scenes, it’s still important to know where your money is held and how you can access it. Understanding your custodian relationship promotes transparency and helps you stay in control.

5. Financial Planning Engagement Letter

An advisor might send you an engagement letter to review and sign if they offer financial planning. This document outlines the scope of their services, what to expect from them, and your responsibilities as a client. By doing so, a professional showcases their approach and keeps your relationship above board.

Unlike the broader investment advisory agreement mentioned above, the engagement letter is often used financial planning work, encompassing specific projects. This could include:

• Retirement or cash flow planning.
• Tax strategy reviews.
• Education funding plans.
• Insurance or estate planning guidance.

In addition to the services you receive, the engagement letter will document how you’ll pay for financial planning. For example, it may specify a quarterly flat fee or an hourly rate for consultations. It might also outline the advisor’s compensation, including details such as their salary and what incentives (if any) they have throughout your relationship.

Not all firms will offer an engagement letter, but it’s worth reading if they do. It’ll provide clarity and serve as a reference point as you progress throughout your collaborative relationship.

Bottom Line: Stay Mindful of Key Details

When you begin working with a financial advisor firm, the paperwork involved may feel overwhelming or superfluous. However, each document plays an important role in facilitating trust and transparency as your relationship begins and continues.

Materials such as advisory agreements or custodial paperwork clarify how the advisor will serve you and what responsibilities each party carries. They create a shared understanding that helps prevent future confusion and delivers a clearer picture of what to expect from the partnership.

Before signing anything, take the time to review each item carefully. Don’t hesitate to ask questions or request clarification, either in your initial consultation or at any time thereafter. A good advisor will welcome your engagement and take the time to explain every part of the process. After all, transparency and communication are the cornerstones of a successful financial planning partnership.