Investment Management Agreement Canada: A Guide to Understanding the Essentials

Investment management is a crucial component of financial planning. It involves the professional management of investment assets, such as stocks, bonds, and real estate, with the goal of generating returns that will meet or exceed a client`s investment objectives. An investment management agreement (IMA) is a contract between an investment manager and a client that outlines the terms and conditions of the investment management services provided.

In Canada, investment management agreements are governed by provincial securities regulators, and the rules and regulations vary from province to province. However, certain elements of IMA are common across the country. Let`s take a closer look at some of these essential components:

Scope of Services

The scope of services section outlines the specific investment management services that the investment manager will provide to the client. The services may include portfolio management, investment research, asset allocation, and risk management. It`s important to ensure that the scope of services is clearly defined, and the client understands what they can expect from the investment manager.

Investment Objectives

The investment objectives section outlines the client`s investment goals, such as capital appreciation, income generation, or preservation of capital. The investment manager should work with the client to establish realistic and achievable investment objectives while keeping in mind the client`s risk tolerance, time horizon, and other relevant factors.

Investment Guidelines

The investment guidelines section outlines the parameters within which the investment manager will make investment decisions. These guidelines may include restrictions on the types of securities that can be purchased, the allocation of assets across different classes, and the maximum exposure to certain sectors or industries. It`s important to ensure that the investment guidelines are consistent with the client`s investment objectives and risk tolerance.

Fees and Expenses

The fees and expenses section outlines the compensation arrangement between the investment manager and the client. This may include management fees, performance fees, and other expenses, such as brokerage fees and custodial fees. It`s important to ensure that the fees and expenses are clearly defined and transparent, and the client understands how they will be charged.

Termination

The termination section outlines the circumstances under which either party can terminate the IMA. This may include breaches of contract, changes in the investment objectives or guidelines, or other factors. It`s important to ensure that the termination clauses are fair and reasonable, and the client understands the consequences of terminating the IMA.

Conclusion

An investment management agreement is a crucial document that outlines the terms and conditions of the investment management services provided by an investment manager. It`s important to ensure that the IMA is clear, transparent, and consistent with the client`s investment objectives and risk tolerance. By understanding the essential components of an IMA, clients can make informed decisions and work with their investment managers to achieve their financial goals.