Friends and Family questions

[Joebone]

I am starting a Friends and Family account at IB. I have created a General Partnership for the time being. I will use this GP and the Freinds and Fam account until I reach 10 or so clients then create an LLC and begin the process to become a RIA and get my 65. I will move all the clients to the new account and hopefully transition to a full-time money manager.


My Father and I have a strategy that is producing a semi SPY correlated return that is around 25% - 30%.
We have a few people asking us to manage their money. So this is my plan.

What am I missing??? Is this a good plan?? Is there a terrible pitfall waiting for me?

 

[Scataphagos]

Is there a terrible pitfall waiting for me?

Always is. Just a matter of whether you recogise it in time or not.

 

[Joebone]

Always is. Just a matter of whether you recogise it in time or not.

haha, well I'll keep my eyes open for the "unknown unknown's" but aside from those is this what others have done?

 

[Robert Morse]

I am starting a Friends and Family account at IB. I have created a General Partnership for the time being. I will use this GP and the Freinds and Fam account until I reach 10 or so clients then create an LLC and begin the process to become a RIA and get my 65. I will move all the clients to the new account and hopefully transition to a full-time money manager.


My Father and I have a strategy that is producing a semi SPY correlated return that is around 25% - 30%.
We have a few people asking us to manage their money. So this is my plan.

What am I missing??? Is this a good plan?? Is there a terrible pitfall waiting for me?

What state Do you live in? Are you sure you don't have to register now? Just because IB allows it, it does not relieve you of your state securities laws. You should check if you are charging fees.

 

[toc]

Also F&F IB accounts is only 5 clients or may be I am wrong. Although you can have 5 for yourself and another 5 with a family member.

Correction: upto 15 clients allowed

Manage 15 or fewer multiple accounts of varying types under a single login, including Individual, Joint, Trust, IRA, UGMA/UTMA, Corporation, Partnership, Limited Liability Corporation, and Unincorporated Legal Structures.

 

[tommcginnis]

You can't charge fees with F&F, and when you do, you'll be keying in "Professional" fees for data/trading. Not a big deal, but be aware and have your other ducks lined up before you do.

 

[Joebone]

What state Do you live in? Are you sure you don't have to register now? Just because IB allows it, it does not relieve you of your state securities laws. You should check if you are charging fees.

I live in Tennessee, I have been doing some state research for a while. It appears to be acceptable for me to have clients and charge a fee as long as I'm under 15 clients and 25 million.

I also have to clarify that I'm not a financial advisor and advertising is prohibited.

 

[Joebone]

You can't charge fees with F&F, and when you do, you'll be keying in "Professional" fees for data/trading. Not a big deal, but be aware and have your other ducks lined up before you do.

Yes, I have discovered this. There is an activity fee and a professional data fee of $110 I believe.

also when you say you "can't" charge a fee.... I think you can it just creates a professional fee??? is that correct?

 

[stevegee58]

I think he means you *can* charge fees but by doing so you'll be flagged as a professional and your data fee will go up.

 

[tommcginnis]

Yes, I have discovered this. There is an activity fee and a professional data fee of $110 I believe.

also when you say you "can't" charge a fee.... I think you can it just creates a professional fee??? is that correct?

When the time comes, you'll find "client" payments will be untaxed (or, unmolested if an IRA) as a side benefit to them. The data fees de'jure will also go unnoticed. JUST KEEP TRACK OF EVERYTHING. "Phew!" I really think IB undersells all of this stuff.