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AI Investment Advisory Fee Agreement Review

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Guided by Grayver Law Group
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An advisory fee agreement establishes the terms by which a Registered Investment Advisor (RIA) provides services and charges fees. Justee reviews advisory agreements against the Investment Advisers Act of 1940, SEC Rule 204-3 (Form ADV delivery), Rule 206(4)-2 (custody), and state RIA rules to flag fee, fiduciary, and disclosure issues.

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Key Takeaways

SEC Rule 204-3 requires Form ADV Part 2A and 2B delivery before or at agreement execution

RIAs are fiduciaries under §206 of the Investment Advisers Act — fees and conflicts must be fully disclosed

Performance-based fees are restricted under §205 and Rule 205-3 (qualified clients only)

1-2 minutes*

Average Review Time

170+ compliance points analyzed*

Compliance Checks

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Document Security

* Estimates based on typical documents. Actual results vary by document type and complexity.

Investment advisory fee agreements are governed by the Investment Advisers Act of 1940 (15 U.S.C. §80b-1 et seq.) and related SEC and state rules. Section 206 imposes a fiduciary duty on advisers — clarified by SEC IA-5248 (June 2019) — requiring full and fair disclosure of all material facts including fees, conflicts of interest, and changes to investment strategy. Rule 204-3 requires delivery of Form ADV Part 2A (firm brochure) and Part 2B (supervised person brochure) before or at the time of entering an advisory agreement. Section 205 restricts performance-based fees to "qualified clients" (defined under Rule 205-3 as $1.1M assets managed by the adviser or $2.2M net worth as of 2024 amendments). Rule 206(4)-2 (custody rule) requires specific disclosures and surprise audits when the adviser has custody. State RIA rules (typically for advisers managing under $100M) follow NASAA model templates with similar requirements. Justee analyzes advisory fee agreements against §206, §205, Rules 204-3 and 206(4)-2, and standard RIA precedents.

How It Works

1

Upload Your Document

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2

AI Analysis

Our AI reviews your document for compliance issues

3

Review Findings

Get detailed findings with risk ratings and legal citations

4

Take Action

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What We Check

Verifies Form ADV Part 2 delivery and acknowledgment

Tests §205 qualified-client requirement for performance fees

Reviews fiduciary disclosures and conflict-of-interest acknowledgments

Validates fee calculation, billing frequency, and termination

Confirms custody rule (206(4)-2) compliance

Common Risks We Identify

Form ADV not delivered before agreement signing

Performance fee charged to non-qualified client

Fee schedule exceeds disclosed range

Custody triggered without surprise audit

Termination provision restricts client's right to depart

Hypothetical Case Study by Justee

Justee recently analyzed an advisory agreement with a 1.25% AUM fee, a 10% performance fee on returns above 6%, and Form ADV "available on request" for a $4.5M client engaging a state-registered RIA in Texas.

Issue Found: The performance fee violated §205 and Rule 205-3: the client had $4.5M in assets and a $5M net worth — under the qualified-client thresholds at the time. The Form ADV "available on request" violated Rule 204-3 — the brochure must be delivered before or at execution. The agreement also lacked the required hedge clause language acknowledging that fiduciary duties cannot be waived. The Texas State Securities Board would have flagged on the next examination.

Justee Recommendation: We restructured: (i) removed the performance fee or limited to qualified-client subset, (ii) ensured Form ADV delivery with signed receipt, (iii) added §215 hedge clause language acknowledging fiduciary obligations, and (iv) reviewed the 1.25% AUM fee against industry benchmarks (in line for the asset level).

Form ADV Available on Request

Problematic Language

"Form ADV Part 2 is available on request from Adviser."

Recommended Language

"Adviser has provided Client with Form ADV Part 2A (firm brochure) and Part 2B (supervised person brochure) prior to or contemporaneously with the execution of this Agreement, in compliance with SEC Rule 204-3 (or equivalent state rule). Client acknowledges receipt of both documents by signature below. Adviser shall deliver an updated Form ADV Part 2A annually within 120 days of fiscal year-end and shall promptly deliver any material amendments."

Why it matters: Rule 204-3 requires delivery before or at agreement execution. "Available on request" violates the rule and risks SEC/state enforcement.

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"Justee is redefining the legal document compliance process across all practice areas, transforming hours of work into minutes, while reducing stress and boosting accuracy."

Artem Dolukhanyan
Artem Dolukhanyan

Partner, Corporate Transactions at Grayver Law Group

AI Review vs. Manual Review

FeatureJustee AI ReviewManual Review
Review Time2-5 minutes2-4 hours
CostFree trial available$150-500+
Legal CitationsAutomaticVaries by reviewer
Clause SuggestionsIncludedExtra fee
Availability24/7 instantBusiness hours
* Comparison data represents estimates based on industry research and internal testing for typical contract types. Review times, costs, and accuracy percentages vary by document complexity, length, jurisdiction, and specific legal requirements. See full disclaimer below.

Official Resources

SEC Investment Advisers Act

SEC Investment Advisers Act of 1940

SEC Rule 204-3 Brochure Rule

SEC IA brochure delivery rules

NASAA Model RIA Rules

NASAA state RIA resources

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Annuity Contract ReviewEngagement Letter ReviewSubscription Agreement ReviewSide Letter Review
Important Legal Disclaimer

Not Legal Advice: The information and analysis provided by Justee AI is for general informational purposes only and does not constitute legal advice. While we strive to provide accurate and helpful information, our AI-powered service is not a substitute for professional legal counsel.

No Attorney-Client Relationship: Use of Justee AI does not create an attorney-client relationship. Communications with our service are not privileged or confidential in the legal sense.

Consult a Professional: For specific legal matters, we strongly recommend consulting with a qualified attorney licensed in your jurisdiction. Legal requirements vary by location and circumstances, and only a licensed attorney can provide advice tailored to your specific situation.

Performance Estimates (*): All statistics, metrics, and numerical claims on this page — including review times, cost comparisons, accuracy percentages, and database size — are estimates based on internal testing, industry research, and typical use cases. Actual results vary based on document type, complexity, length, jurisdiction, and other factors. Cost comparisons reference publicly available average attorney rates and are not guaranteed savings. "1M+ laws and regulations" refers to the breadth of Justee's reference database and does not imply that every provision is checked against every law for every document.

By using our service, you acknowledge that you have read and agree to our Terms of Use and understand the limitations of AI-powered legal analysis. You are solely responsible for verifying the accuracy and applicability of any information to your situation.

Investment Advisory Fee Agreement Review FAQ

Yes — before or at agreement execution under SEC Rule 204-3. Justee verifies delivery and acknowledgment.

Only if you're a "qualified client" ($1.1M+ AUM or $2.2M net worth). Justee verifies eligibility.

Typically AUM-based (1-1.5% for ≤$1M, declining to 0.5-0.8% for $5M+). Justee benchmarks against industry standards.

Under §206 of the Advisers Act, your advisor must act in your best interest, disclose conflicts, and obtain informed consent. Justee verifies disclosures.

No. Justee accelerates client-side review. Advisors' compliance counsel remains essential.

Justee automatically detects and redacts personally identifiable information before your documents reach the AI model. Protected types include:

Personal data:
  • Names, email addresses, and phone numbers
  • Social Security numbers and tax identifiers (ITIN)
  • Physical addresses and dates of birth
  • Credit card and bank account numbers
  • Driver's license and passport numbers
  • Medical provider identifiers (NPI) and case numbers
Corporate and business data:
  • Company and organization names
  • Business addresses and geographic locations
  • SWIFT/BIC codes, IBAN numbers, and bank routing numbers
  • Business license numbers and attorney bar IDs
  • Corporate tax identifiers (EIN)
Our system achieves 100% detection of standard PII types and approximately 97% overall coverage. Certain rare identifiers — such as cryptocurrency wallet addresses and MAC addresses — may not be detected automatically. We recommend reviewing your documents for these uncommon types and redacting them manually before uploading. See our Privacy Policy and Terms of Use for details and limitations.

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Last updated: May 13, 2026

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