Automatic renewal clauses
An engagement that renews itself each year can be a convenience. It becomes a problem when the notice period is long, the renewal date is easy to miss, or a fee is due for a year you did not want.
A red flag is a reason to ask more questions. It does not mean an adviser has done anything wrong. This page describes a practice in general terms and is not about any particular firm.
When it is a problem
- The renewal is in the standard terms rather than the letter, and nobody mentioned it.
- The notice period is long, so you have to decide about next year before this year's claim has been reviewed.
- A fee, a minimum or a retainer is due for a renewed year even if you decide not to claim.
- Ending the engagement after a renewal costs money.
When it is not a problem
- You want continuity, your claim is similar each year, and renewal saves you re-signing a letter you are happy with.
- The notice period is short, the adviser reminds you before the renewal date, and there is no charge for not renewing.
- Each year's fee is agreed afresh at renewal rather than carried forward.
- You can end the engagement at any time with reasonable notice and take your records with you.
What to do
- Find the term, the renewal date and the notice period in the letter, and write the notice date in your diary.
- Ask what is due for a renewed year in which you do not claim.
- Ask for a reminder before each renewal, in writing, and for the right to decide each year.
- If the notice period is longer than three months, ask for it to be shortened. The script for giving notice covers the rest.
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