<PAGE>
 
                                 Exhibit 10.8
                                 ------------

                         INVESTMENT ADVISORY AGREEMENT
                          FOR DISCRETIONARY ACCOUNTS


Gentlemen:

          The undersigned (the "Client") hereby employs Harris Associates L.P.
("Harris") as the investment adviser for the Account (referred to below) under
the following terms and conditions:

          1.   Harris is authorized to act for the client with respect to the
acquisition, retention, management and disposition of all assets which the
client may put under supervision at Harris (the "Account").  Harris shall place
orders for the execution of securities transactions, without prior consultation
with or notification of the Client, for the purchase, sale, exchange or other
acquisition or disposition of securities for the Account.  Harris shall have
complete discretion as to the nature, amount and timing of all such
transactions.  Harris shall not subcontract any of its obligations or use sub-
advisers with respect to the performance of its investment advisory services
hereunder.  Investments shall be in compliance with applicable law, including
Illinois insurance law. The Client will furnish Harris with all powers of
attorney necessary for Harris to carry out this authority, but no such powers
shall be construed to authorize Harris to take any action not authorized by this
Agreement.

          2.   The Client shall pay Harris for the services to be rendered by
Harris under this Agreement in accordance with the fee schedule attached hereto
as Schedule A.

          3.   (a)  Harris shall place orders for the execution of transactions
with or through such brokers, dealers or issuers as Harris may select.

               (b) The Client understands that Harris Associates Securities L.P.
("Securities"), an affiliate of Harris, is a broker-dealer and that Harris
intends to have Securities execute securities transactions as agent for the
Account and Securities will receive brokerage fees for executing such
transactions.  These brokerage fees will be in addition to the investment
management fees paid by the Client to Harris.  The brokerage fees charged to the
Account by Harris with respect to any transaction for which Securities acts as a
broker for the account shall be 40% of the minimum commission rates in effect on
April 1, 1975 for transactions executed on the New York Stock Exchange.  The
Client understands that other brokers may be willing to execute transactions for
the Account at commission rates different from those charged hereunder.
Securities' ability to charge the foregoing brokerage commissions to the Account
is an integral factor in the establishment of Harris' fees under the Agreement.
<PAGE>
 
               (c) Harris may execute brokerage transactions for the Account
through brokers or dealers who also provide Harris with "research services," as
defined in section 28(e)(3) of the Securities Exchange Act of 1934. The
commission paid to such brokers may be in excess of the amount of commission
another broker would charge for the same transaction. Such research services,
moreover, may be available to Harris on a cash basis. Before effecting any such
transaction, Harris will determine in good faith that the amount of such
commission is reasonable, in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that particular
transaction or Harris' overall responsibilities to all of its clients. The
research services so provided may relate to a specific transaction placed with
such broker, but for the most part the research services will consist of a wide
variety of information useful to the Account, Harris, and to Harris' other
clients. Harris' ability to obtain such research services is an integral factor
in the establishment of Harris' fees hereunder.

               (d) Harris may effect securities transactions for the accounts of
other clients which are identical or similar to those which Harris may effect
for the Account at the same or different times.  Harris may also allocate
transactions in securities among clients on such basis as Harris determines to
be reasonable, including a determination that some clients may not purchase or
sell the securities at the same time as others.

               (e) As more fully set forth in Part II of Harris' Form ADV which
has been provided to the Client, the Client acknowledges that Harris' principals
may occasionally buy and sell securities for their own account, including those
securities recommended to clients. Such purchases or sales may be at the same or
different times or prices as Client's purchases or sales.

               (f) With respect to securities transactions executed for the
Account at Harris' direction through Securities, Securities may execute
transactions for the accounts of its other clients which are identical or
similar to, or different from or opposed to, securities transactions which
Securities may execute for the Account.

               (g) In effecting securities transactions at the direction of
Harris, Securities may effect similar transactions in the same security
simultaneously for the Account and for the accounts of other clients. Securities
may bunch these securities transactions orders. Harris will allocate the
securities purchased or sold therein among the participating accounts (including
the Account) as Harris determines to be reasonable. Harris and/or Securities may
be charged a lesser per unit commission on such bunched orders than Harris
charges its clients to whom the securities are allocated. The Client's brokerage
commission will be based upon the brokerage schedule applicable to the Account
based upon the number of shares, or other applicable unit, acquired by the
Account and the commission rate agreed to with respect to such transaction.

          4.   In connection with the services to be rendered by Harris under
this Agreement, under certain circumstances, it is advisable that Harris have
the authority to vote shares held in Client's Account with respect to matters
which have direct impact on the value of such shares and which are best analyzed
in the context of Harris' investment decisions with respect to the Account.

          Therefore, Harris is hereby granted the power as Client's Proxy and
Attorney-in-Fact,
<PAGE>
 
upon the following conditions, to vote the shares of stock or other securities
held in the Account, with respect to all matters which Harris determines to be
relevant and appropriate.  Harris will notify Client, and any appropriate person
holding such securities in "street name,' as trustee, or custodian, when Harris
has determined its intent to exercise this authority.  Upon such notification,
Client, by this Agreement, directs that such persons act on Harris' instructions
to vote the shares, unless the Client notifies Harris and such other person of
Client's determination to vote such shares itself.

          Notwithstanding the foregoing powers which are granted to Harris
hereunder, to the extent that the acceptance of such powers places any
affirmative regulatory obligations upon Harris because Harris may be deemed to
own or control any regulated entity, Harris shall not be deemed to have accepted
such powers, unless and until Harris complies with any and all applicable laws
and regulations governing such regulated entity.

          5.   Harris shall be responsible for its malfeasance or violation of
applicable law, but neither Harris nor any of its officers, directors or
employees shall be responsible hereunder, absent a finding of willful misconduct
or gross negligence, for any other action, performed or omitted to be performed
in good faith, or for any errors in judgment in managing the Account. Harris
shall not be responsible for any loss incurred by reason of any act or omission
of any broker, dealer or custodian other than itself; provided, however, that
Harris will make reasonable efforts to require that brokers and dealers perform
their obligations with respect to the Account.  It is understood that nothing
herein shall in any way constitute a waiver or limitation of any of the
obligations which Harris may have under any federal securities laws.

          6.   The assets of the Account shall be held by the bank, trust
company, broker-dealer or other entity acceptable to Harris and appointed by the
Client as custodian of the Account. The custodian shall at all times be
responsible for the physical custody of the assets of the Account and for the
collection of interest, dividends and other income attributable to the assets of
the Account.

          7.   This Agreement amends and is in substitution of all prior
agreements, if any, between the parties with respect to the Account.  This
Agreement shall be governed by the laws of the State of Illinois.

          8.   This Agreement may be terminated by the Client at any time, by
giving Harris prior written notice of termination, and by Harris, by giving the
Client thirty days' prior written notice of termination.  Any termination of
this Agreement shall not, in any case, affect or prevent the consummation of any
transaction initiated prior to such termination.  Additionally, the Client may
terminate this contract within five days of signing it without any obligation to
pay any prorated fee.  No assignment (as that term is defined in the Investment
Advisers Act of 1940) of this Agreement shall be made without prior written
consent of the Client.

          9.   Notices shall be deemed effective if addressed and mailed,
certified or registered mail, to the Client, and to Harris.

          10.  Harris shall maintain as confidential any and all information
regarding Client
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that Harris obtains under this and all related agreements.

          11.  Harris, being organized as a partnership, will notify Client in
writing when there is a change in the membership of its organization within a
reasonable time after the occurrence of such change.

          If the foregoing correctly sets forth our understanding, please sign
the enclosed copy of this letter and return it to Harris.

Very truly yours,

HARRIS ASSOCIATES L.P.

By:  /s/ Robert M. Levy
     --------------------------------------
Robert M. Levy

/s/ Earl J. Rusnak, Jr.
----------------------------------------
Earl J. Rusnak, Jr.

ACCEPTED AND AGREED TO this 22nd day of January 1996

CLIENT:  AmerInst Insurance Company

/s/ Ronald S. Katch, Treasurer
------------------------------
<PAGE>
 
                           SCHEDULE A TO INVESTMENT
                           ADVISORY AGREEMENT DATED

                                     1996
                                     ----

                                    BETWEEN

                            HARRIS ASSOCIATES L.P.
                                  ("Harris")

                                      AND

                          Amerlnst Insurance Company
                          --------------------------
                                  ("Client")


          1.   This Schedule of Compensation can be amended from time to time by
Harris upon 30 days' prior written notice to the Client.

          2.   The Client shall pay, at the beginning of each quarterly period,
a fee (to be prorated and a refund made to the Client for any period of less
than a quarter) based on the market value of the Account, including cash and
securities, taken on the last business day of the preceding quarter, as follows:

          a)  0.25% on the first $10,000,000, plus

          b)  0.125% on the amount in excess of $10,000,000.

          c)  Notwithstanding the foregoing, there shall be a minimum quarterly
          charge of $2,500

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          3.   By initialing in the space provided after this paragraph, Client
desires the bank, trust company, broker-dealer or other entity which is acting
as the custodian of the Account to pay to Harris the fee described on this
Schedule A upon receipt of Harris' invoice for services rendered hereunder.  In
addition, Client hereby authorizes Harris to provide to such custodian of the
Account a copy of this Schedule A as evidence of the authorization granted
pursuant to this paragraph.  /s/ RSK
                             -------
                             Client Initials


                                           Client Signature
/s/ Robert M. Levy                         By:  /s/ Ronald S. Katch, Treasurer
------------------------------                --------------------------------
Robert M. Levy


/s/ Earl J. Rusnak, Jr.
------------------------------
Earl J. Rusnak, Jr.

Date: January 22, 1996
<PAGE>
 
                                 AMENDMENT TO
                         INVESTMENT ADVISORY AGREEMENT
                          FOR DISCRETIONARY ACCOUNTS



          THIS AMENDMENT TO INVESTMENT ADVISORY AGREEMENT FOR DISCRETIONARY
ACCOUNTS ("Amendment") is made as of this 2nd day of April, 1996 by and between
AmerInst Insurance Company ("Client") and Harris Associates L. P. ("Harris").

          WHEREAS, Client and Harris have entered into a certain Investment
Advisory Agreement dated as of January 22, 1996 (the "Agreement") (all
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Agreement); and

          WHEREAS, the parties desire to amend the Agreement as hereinafter
provided.

          NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

          1.   Section 1 of the Agreement is amended be deleting the fifth
sentence and inserting the following:

          Investments shall be in compliance with applicable law, including
          Illinois insurance law generally and specifically Article VIII of the
          Illinois Insurance Code.  Investments shall also be in accordance with
          the guidelines established by Client's Investment Committee.

          2.   Section 6 of the Agreement is amended by deleting the first
sentence and inserting the following:

          The Assets of the Account shall be held by a corporation that is
          qualified to administer trusts in the State of Illinois under the
          Corporate Fiduciary Act and that has an office in the State of
          Illinois at which the Account is maintained, or any other entity
          permitted by Illinois law which is acceptable to Harris and appointed
          by the Client as custodian of the Account.
<PAGE>
 
          3.   A new Section 12 is added to the Agreement to read, in its
entirety, as follows:

          The parties agree that the Agreement, unless sooner terminated or
          revised, shall be resubmitted to the Illinois Department of Insurance
          five years after the original review and at five year intervals
          thereafter.  Amendments to the Agreement shall be subject to
          Department review prior to becoming effective.

          This Amendment may be executed in counterparts, each of which shall
constitute one and the same instrument.

          In all other respects, the Agreement shall remain in full force and
effect.


HARRIS ASSOCIATES L.P.                   AMERINST INSURANCE COMPANY


/s/ Robert M. Levy                       By:  /s/ Ronald S. Katch
-----------------------------------         ----------------------------------
Robert M. Levy                           Ronald S. Katch
                                         Investment Committee Chairman


/s/ Earl J. Rusnak, Jr.
-----------------------------------
Earl J. Rusnak, Jr.