What is an advice relationship?
An advisory relationship is an agreement between an investor and an investment institution where the investment institution advises the investor on buy and sell decisions, but the ultimate responsibility for the transactions lies with the investor themselves. The investor thus receives advice, but independently executes the final transactions, and thereby also bears the risk.
Similar terms:
- Investment recommendation: Specific advice from an investment institution on the buying or selling of certain financial products.
- Duty of care: The obligation of an investment institution to protect the interests of the investor and to provide honest advice.
- Fiduciary management: A form of asset management where the investment institution assumes full responsibility for the management of the portfolio from the investor, in contrast to the advisory relationship where the investor makes the decisions themselves.
An advisory relationship offers investors the opportunity to utilise expert advice while retaining control over their investment decisions. It requires the investor to remain actively involved in the management of their portfolio.