Getting money from investors vs. trading their money in their own brokerage account

P

pgo1970

Say someone asked me to manage some of their money (around $800,000).

Can't I just ask them to open a separate brokerage account under their own name, put the $800,000 into it, and give me access to the account? I could then trade the account for them and charge them via regular invoices like any other consultation work.

This sounds simpler for me (less legal, regulatory hassle) than setting up an entity and asking them to send me the money.

Are there any practical/legal/other reasons I cannot/shouldn't take that simpler approach?
 
Many managers do it that way. If you or the client are in the USA, or you use USA exchanges, you will have to be registered.
 
pgo1970 said:
Say someone asked me to manage some of their money (around $800,000).

Can't I just ask them to open a separate brokerage account under their own name, put the $800,000 into it, and give me access to the account? I could then trade the account for them and charge them via regular invoices like any other consultation work.

This sounds simpler for me (less legal, regulatory hassle) than setting up an entity and asking them to send me the money.

Are there any practical/legal/other reasons I cannot/shouldn't take that simpler approach?
More...

Do you trade your own money? If so they can just simulate your trading. No license required.
 
Technically it's possible, however, in essence what you are doing is financial advisory, for which you might need SEC registration, be series 65 certified etc etc. And this fee must not be performance-based, unless your client is a HNWI. However, many of those don't apply for non-US residents though...
 
QuantWizard said:
Technically it's possible, however, in essence what you are doing is financial advisory, for which you might need SEC registration, be series 65 certified etc etc. And this fee must not be performance-based, unless your client is a HNWI. However, many of those don't apply for non-US residents though...
More...

Managing money can be done indirectly through signals service which does not require license in the US.
 
AFAIK with US clients you have to be registered to manage over $400K. Other than that, trading investors personal account and not dealing with various risks associated with transferring and managing the money directly is much easier, yes.
 
If the money is from family, you are basically exempt from all the rules.

If you don't take a performance fee you are largely exempt from all the rules.

The broker will make you and him sign a power of attorney form. You can do that and charge fees separately. This is to protect all the parties from amnesia. You can charge him outside of that (like you suggested) but if he decides to sue you because of losses, you will have little to stand on without the certifications, etc.
 
I'm the OP. Here is some more info:

Thanks for the suggestions. Trading directly on a brokerage account owned by the client sounds best so far.

I'm a non-US citizen, currently resident of Hong Kong.

I want to be able to charge performance/incentive fees, say 12% of the profits.

Do I need any special licenses to do this for non-US clients?

What about US clients?
 
pgo1970 said:
I'm the OP. Here is some more info:

Thanks for the suggestions. Trading directly on a brokerage account owned by the client sounds best so far.

I'm a non-US citizen, currently resident of Hong Kong.

I want to be able to charge performance/incentive fees, say 12% of the profits.

Do I need any special licenses to do this for non-US clients?

What about US clients?
More...

If you are residing in Hong Kong you should operate most likely according to the Hong Kong laws. Also remember to track your clients' profits and provide them with diligent accounting. :-)
 
pgo1970 said:
Say someone asked me to manage some of their money (around $800,000).

Can't I just ask them to open a separate brokerage account under their own name, put the $800,000 into it, and give me access to the account? I could then trade the account for them and charge them via regular invoices like any other consultation work.

This sounds simpler for me (less legal, regulatory hassle) than setting up an entity and asking them to send me the money.

Are there any practical/legal/other reasons I cannot/shouldn't take that simpler approach?
More...

You may want to look at IB for setting up a "Friends and Family" account if you have 15 or fewer clients, however you must be "exempt from registration" and that varies by jurisdiction, so you may want to ask them.

I believe TD Ameritrade also offers a similar structured account, whereby you have one "Master Account" and various Sub-Accounts, however each of the Sub Accounts are in the client's OWN names and tax-ID numbers, which makes it easier for accounting purposes.

Check out the following links.

https://www.interactivebrokers.com/en/index.php?f=friendsFamilyAccounts&p=ff

https://www.interactivebrokers.com/en/index.php?f=friendsFamilyAccounts&p=more
 
You must log in or register to reply here.
Back
Top