<PAGE>   1

                                                                 EXHIBIT 10(a)


                      ALLIED CAPITAL MORTGAGE CORPORATION
                         INVESTMENT ADVISORY AGREEMENT

          THIS AGREEMENT is made by and between Allied Capital Mortgage
Corporation, a Maryland corporation (the "Company"), and Allied Capital
Advisers, Inc., a Maryland corporation (the "Adviser").

1.        PURPOSE OF THE COMPANY.

          The Company is organized under the laws of the State of Maryland as a
closed-end investment company registered as such under Investment Company Act
of 1940 (the "ICA").

2.        THE INVESTMENT ADVISER.

          The Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and has entered into this
Agreement with the Company to act as its investment adviser on the terms set
forth herein.

3.        OBLIGATIONS OF THE ADVISER.

          The Company hereby engages the Adviser's services as the Company's
investment adviser.  As such, the Adviser will:

          (a)       advise the Company as to the acquisition and disposition of
securities, loans, real estate interests and other assets in accordance with
the Company's investment policies;

          (b)       make available and, if requested by entities in which the
Company has invested or is proposing to invest, render managerial assistance
to, and exercise management rights in, such entities;

          (c)       provide to the Company office space and facilities and
services to the extent required of the Adviser's officers and employees;

          (d)       maintain the Company's books of account and other records
and files;

          (e)       report to the Company's Board of Directors, or to any
committee or officer of the Company acting pursuant to the authority of the
Board, at such times and in such detail as the Board deems appropriate in order
to enable the Company to determine that its investment policies are being
observed and implemented and that the Adviser's obligations hereunder are being
fulfilled.  Any investment program undertaken by the Adviser pursuant hereto
and any other activities undertaken by the Adviser on the Company's behalf
shall at all times be subject to any directives of the Company's Board of
Directors or any duly constituted committee or officer of the Company acting
pursuant to authority of the Company's Board of Directors; and





                                       1
<PAGE>   2
          (f)       subject to the Company's investment policies and any
specific directives from the Company's Board of Directors, effect acquisitions
and dispositions for the Company's account in the Adviser's discretion and to
arrange for the documents representing investments acquired to be delivered to
a custodian of the Company; and

          (g)       on a continuing basis, monitor, manage and service the
Company's loan and/or investment portfolio.

4.        EXPENSES TO BE PAID BY THE ADVISER.

          The Adviser will pay for its own account all expenses incurred by the
Adviser in rendering the services to be rendered by the Adviser hereunder.
Without limiting the generality of the foregoing, the Adviser will pay the
salaries and other employee benefits of the persons in its organization whom
the Adviser may engage to render such services, including without limitation
persons who may from time to time act as the Company's officers.
Notwithstanding the foregoing, the Board of Directors of the Company may, in
its sole discretion, award to such officers options to acquire shares of the
Company's common stock, which shall not be deemed part of their salaries or
other employee benefits for the purpose of this paragraph.

5.        EXPENSES TO BE PAID BY THE COMPANY.

          The Company will reimburse the Adviser promptly, against the
Adviser's voucher, for any expenses incurred by the Adviser for the Company's
account.  Without limitation, such expenses shall include all expenses of any
offering and sale by the Company of its shares and, except as otherwise
specifically provided above, all expenses of the Company's operations; the fees
and disbursements of the Company's counsel, accountants, custodian, transfer
agent and registrar; the costs related to promoting the Company's stock; fees
and expenses incurred in producing and effecting filings with federal and state
securities administrators; costs of the Company's periodic reports to and other
communications with the Company's shareholders; fees and expenses of members of
the Company's Board of Directors who are not directors, officers or employees
of the Adviser or of any entity affiliated with the Adviser, and fees of
directors who are such officers, directors or employees; premiums for the
fidelity bond maintained by the Company pursuant to ICA Section 17; and all
transaction costs incident to the acquisition and disposition of securities by
the Company in proportion to the Company's participation therein, including,
without limitation, legal and accounting fees and other professional or
technical fees and expenses (e.g., credit report, title search and delivery
charges, costs of specialized consultants such as accountants or
industry-specific technical experts, and deal-specific travel expenses)
incurred in monitoring, negotiating and working-out such investments as well as
responding to any litigation arising therefrom.  If the Company for its
corporate purposes uses the services of attorneys or paraprofessionals on the
staff of the Adviser in lieu of outside counsel, the Company will reimburse the
Adviser for such services at hourly rates calculated to cover the cost of such
services, as well as for incidental disbursements.  The Company will reimburse
the Adviser promptly, against the Adviser's voucher, for (a) any origination
fee with respect to any loan or investment made by the Company that was
identified or referred to the Company by any third party with which the Company
or the Adviser then has a written agreement





                                       2
<PAGE>   3
or arrangement that specifies the amount or rate of such fee or (b) any
origination fee with respect to any loan or investment made by the Company that
was identified or referred to the Company by any third party with which the
Company or the Adviser then does not have a written agreement or arrangement.
All such origination fees reimbursed to the Adviser will be reviewed as of the
end of each calendar quarter by the Company's Board of Directors.

6.        RECEIPT OF FEES.

          All fees that may be paid by or for the account of an entity in which
the Company has invested or is proposing to invest in connection with an
investment transaction in which the Company participates or provides follow-on
managerial assistance will be treated as commitment fees or management fees and
will be received by the Company, pro rata to the Company's participation in
such transaction.  Nevertheless, the Adviser will be entitled to retain for its
own account any fees paid to the Adviser by or for the account of any entity,
including an entity in which the Company may have invested, for special
investment banking or consulting work performed for the entity which is not
related to such transaction or follow-on managerial assistance.  The Adviser
will report to the Company's Board of Directors not less often than quarterly
all fees received by the Adviser from any source and whether, in its opinion,
any such fee is one that the Adviser is entitled to retain under the provisions
of the paragraph.  In the event that any member of the Company's Board of
Directors should disagree, the matter shall be conclusively resolved by a
majority of the Company's Board of Directors, including a majority of its
members who are not interested persons of the Company.

7.        COMPENSATION TO THE ADVISER.

          The Company will, during the term of this Agreement, pay to the
Adviser, an investment advisory fee equal to (a) 3.5% per year of the average
of the quarter-end values of the Company's consolidated total assets (less the
Company's Interim Investments, as defined below, and cash) for such year (the
"Base Fee"), and (b) 0.125% per quarter of the quarter-end values of the
Company's consolidated Interim Investments and cash.  For this purpose "Interim
Investments" are defined as short-term securities issued or guaranteed by the
U.S. government or an agency or instrumentality thereof, or in repurchase
agreements fully collateralized by such securities.

          Upon the completion of an annual audit at the end of each calendar
year, the Base Fee may be increased or decreased depending on the amount, if
any, by which the investment performance of the Company is greater or less than
13%.  At the end of each of the Company's fiscal years, the net asset value per
share will be calculated by the Company's auditors.  The investment return of
the Company in a particular year will be the sum of: (a) the change in its net
asset value per share during such year; (b) the value of its cash distributions
per share during such year; and (c) the value of capital gains taxes per share
paid or payable, if any, on undistributed realized long-term capital gains
during such year.  The investment performance of the Company for such year will
be its investment return expressed as a percentage of its net asset value per
share at the beginning of such year. (For this purpose, the value of cash
distributions per share and capital gains taxes per share paid or payable on
undistributed realized long-term capital gains will be treated as reinvested in
shares of the Company at the net asset value per share in effect at the close
of business on the record date for the payment of such distributions and the
date on which provision is made for such taxes, respectively, after giving
effect to such distributions and taxes.) To the extent the investment
performance of the Company exceeds 13% for that year, one-fifth of one
percentage point will be added to the Base Fee for every





                                       3
<PAGE>   4
one percentage point of the difference between the investment performance of
the Company and 13%.  The maximum amount added to the Base Fee will be one
percentage point, with the adjusted Base Fee not to exceed 4.5%. To the extent
the investment performance of the Company is less than 13% for that year,
one-fifth of one percentage point will be subtracted from the Base Fee for
every one percentage point of the difference between the investment performance
of the Company and 13%.  The maximum amount subtracted from the Base Fee will
be one percentage point, with the adjusted Base Fee not to be lower than 2.5%
(the "Minimum Base Fee").  For purposes of calculating the adjustment to the
Base Fee, performance percentages will be rounded off to the nearest whole
percentage.

          The Company will, during the term of this Agreement, pay to the
Adviser, quarterly, the Minimum Base Fee equal to 0.625% per quarter (2.5% on
an annualized basis) of the quarter-end value of the Company's consolidated
total assets (less the Company's Interim Investments and cash).  The Company
will also pay 0.125% per quarter (0.5% on an annualized basis) of the
quarter-end value of the Company's consolidated Interim Investments and cash.

          For the purpose of calculating the investment advisory fee, the
values of the Company's assets will be determined as of the end of each
calendar quarter by the Board of Directors.  The Company will pay the Minimum
Base Fee and the fee on Interim Investments and cash with respect to a calendar
quarter as soon as practicable after the values of the Company's assets have
been determined for such quarter.  The Company will pay the difference between
the Minimum Base Fee and the Base Fee as soon as practicable after the values
of the Company's assets have been determined for the year-end.  If the
termination of the Adviser's services hereunder does not coincide with the last
day of a calendar quarter or the year-end, then the Minimum Base Fee determined
in accordance with this paragraph shall be multiplied by the ratio of the
number of days in such quarter during which the Adviser rendered services to
the total number of days in such quarter, with corresponding treatment for
calculating any adjustments to the Base Fee.

8.        INDEMNIFICATION OF THE ADVISER.

          The Company confirms that in performing services hereunder the
Adviser will be an agent of the Company for the purpose of the indemnification
provisions of the Company's Bylaws, subject, however, to the same limitations
as though the Adviser were a director or officer of the Company.  The Adviser
shall not be liable to the Company, its shareholders or its creditors except
for violations of law or for conduct which would preclude the Adviser from
being indemnified under such provisions.

9.        APPROVAL OF THE AGREEMENT.

          The Company represents that the Company's Board of Directors,
including a majority of its members who are not interested persons of the
Company, approved this Agreement at a meeting held on March __, 1996 at which a
quorum was personally present, and a majority, as defined in the ICA, of the
Company's shareholders approved it at a meeting held on the date hereof.  This
Agreement shall continue in effect for two years from its effective date and
thereafter from year to year as long as such continuance is specifically
approved at least annually by the Company's Board of Directors, including a
majority of its members who are not interested persons of the Company, or by
vote of the holders of a majority, as defined in the ICA, of the Company's
outstanding voting securities.





                                       4
<PAGE>   5
10.       TERMINATION OF THE AGREEMENT.

          The foregoing notwithstanding, this Agreement may be terminated by
the Company at any time, without payment of any penalty, on sixty (60) days'
written notice to the Adviser if the decision to terminate has been made by the
Company's Board of Directors or by vote of the holders of a majority, as
defined in the ICA, of the Company's outstanding voting securities.  This
Agreement will terminate automatically in the event of its assignment, as
defined in the ICA.  The Adviser may also terminate this Agreement on sixty
(60) days' written notice to the Company provided; however, that the Adviser
may not terminate this Agreement unless another investment adviser has been
approved by the vote of a majority, as defined in the ICA, of the Company's
outstanding securities and by the Company's Board of Directors, including a
majority of its members who are not parties to such agreement or interested
persons of any such party.

11.       JURISDICTION.

          This Agreement shall be governed by the laws of the State of
Maryland.

       IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
1996.


                                   ALLIED CAPITAL MORTGAGE CORPORATION


Attest:                            By:
       -----------------------        -----------------------------
       T. R. Salley, Secretary        David Gladstone, President


                                   ALLIED CAPITAL ADVISERS, INC.


Attest:                            By:
       -----------------------        -----------------------------
       T R. Salley, Secretary         Joan M. Sweeney, President




                                       5