IB Friend & Family Advisor Fees

[RedSun]

Not sure if this has been discussed before.

IB offers Friend & Family advisor setup. We can put both taxable and non-taxable account from self, family and friends all under advisor (trader) control. The F&F advisor can earn advisor fees, similar to hedge fund structure if the advisor desires.

With this setup, the advisor can earn fees from the IRA accounts from family members. This could create a way to take money out of the IRA accounts to taxable (advisor) account. Personally I think this is all legal if the fee structure is common, not like 10% management fee etc.

Advisor can also take fees of his own IRA account if the above is correct.

What you think?

 

[Butterfly]

how do you get away with the state registration if you see yourself as an advisor? even with the minimum 5 client per state rule.

 

[RedSun]

how do you get away with the state registration if you see yourself as an advisor? even with the minimum 5 client per state rule.

A lot of states have min asset size rule. Most of IB F&F advisors are not registered.

If you manage the IRAs of your spouse and adult children, and of very limited size, registration is not required.

 

[RedSun]

This is from IB:

Account Information
Only Advisors who are exempt from registration are eligible to open a Friends & Family account. Generally, most jurisdictions require that an advisor have 15 or fewer clients in order to qualify for exemption from registration. Registration requirements can vary among jurisdictions and often allow fewer than 15 clients and/or limited AUM. For example, advisors residing in the U.S. may be required to register under either State or Federal law if they meet certain criteria (e.g., total assets under management, number of clients, whether they receive compensation, etc.).

 

[Butterfly]

A lot of states have min asset size rule. Most of IB F&F advisors are not registered.

If you manage the IRAs of your spouse and adult children, and of very limited size, registration is not required.

for immediate family members I get it, but friends???

 

[Butterfly]

This is from IB:

Account Information
Only Advisors who are exempt from registration are eligible to open a Friends & Family account. Generally, most jurisdictions require that an advisor have 15 or fewer clients in order to qualify for exemption from registration. Registration requirements can vary among jurisdictions and often allow fewer than 15 clients and/or limited AUM. For example, advisors residing in the U.S. may be required to register under either State or Federal law if they meet certain criteria (e.g., total assets under management, number of clients, whether they receive compensation, etc.).

I think that rules has changed for a lot of states, it's down to 5 now for most states and you still have to file some kind of document to see if you are fit for investing

 

[RedSun]

I think that rules has changed for a lot of states, it's down to 5 now for most states and you still have to file some kind of document to see if you are fit for investing

Fit? You are so funny.

You or we need to stay fit to manage family funds?

Anyhow, I'm looking for someone who knows the answer....

 

[Butterfly]

Fit? You are so funny.

You or we need to stay fit to manage family funds?

Anyhow, I'm looking for someone who knows the answer....

I think you misread what I wrote, not physically fit, state regulator might ask for evidence of your financial knowledge or skills to see if you are fit for the "job"

 

[RedSun]

I think you misread what I wrote, not physically fit, state regulator might ask for evidence of your financial knowledge or skills to see if you are fit for the "job"

No. Why State cares how you "fit" to manage your family money?? Or one or two of your friend's money?

 

[Butterfly]

No. Why State cares how you "fit" to manage your family money?? Or one or two of your friend's money?

Check with your state regulator, a lot of things are happening in compliance terms at the SEC and state levels, you don't want to put yourself in some kind of compliance violations for managing "friends" money and getting only a small fee for it.

Your state regulator might ask that you file some registration paper and take a level 65 exam.