managing accounts

P

pierson

I have a few friends who have asked me to manage accounts for them. I do not have a brokers license so i was thinking about being the power of attorney over the accounts. If i decide to do this for them i want to make sure all my bases are covered.
Does anyone have experience doing this? Is there any way that i could get in trouble doing this? If so what other types of action would i need to do to make sure i could not be held liable for any loses etc.
I have of course told them they can lose everything and more and that i don't guarantee anything. Everything is their own personal risk.
Do i need to go to the trouble of getting a lawyer to draw up a contract stating that disclaimer or am i protected because they have to sign the broker agreement to give me the power to place trades.

Any help or constructive advise is appreciated,
Pierson
 
They can't pay you if you don't have a securities license. Don't do it just because you are a good friend. If things turn south that will change. If they want to have money invested with your input, apply for a tax id, pool yours and your friend's money to start an investment club.
 
I don't think Weasel is correct about your friends not being able to pay you without a "securities license". What is a securities license, by the way? Do you mean the NASD Series 7 broker's license?

I assume you are in the US and planning on trading securities (as opposed to futures)?

I don't think you need to be a registered investment advisor (RIA) unless you have 15 or more clients or plan on advertising your services. There's a registration exemption for cases like yours. I'm not a lawyer though, so do your own research.
 
ok thanks for the responses. Yes, i wanted to work out some type of payment plan for my efforts if i was to do this.
Couldn't they pay me and call it a consulting fee or something?
Also, any idea where to find out the rules here, would a general lawyer know about these types of dealings or does it need to be a specialized one.
Thanks
Pierson
 
Quote from pierson:

I have a few friends who have asked me to manage accounts for them. I do not have a brokers license so i was thinking about being the power of attorney over the accounts. If i decide to do this for them i want to make sure all my bases are covered.
Does anyone have experience doing this? Is there any way that i could get in trouble doing this? If so what other types of action would i need to do to make sure i could not be held liable for any loses etc.
I have of course told them they can lose everything and more and that i don't guarantee anything. Everything is their own personal risk.
Do i need to go to the trouble of getting a lawyer to draw up a contract stating that disclaimer or am i protected because they have to sign the broker agreement to give me the power to place trades.

Any help or constructive advise is appreciated,
Pierson
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the ib FA account is perfect for this. its easy to get set up without a lawyer. every state is different. most states allow you to do this if you stay under 15 accounts.
 
Quote from vhehn:

the ib FA account is perfect for this. its easy to get set up without a lawyer. every state is different. most states allow you to do this if you stay under 15 accounts.
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But I read somewhere on IB's forum that IB's commissions are counted toward the fee cap calculation which may practically let you receive much less or even none of the advisor fees that are due to you because IB's commissions alone will meet the fee cap leaving no room for actual fee payment to the advisors.

I do my own calculation and find it's really a serious issue to get properly compensated by utilizing IB's FA account. For a $50k account if you do an average of 200+ roundturns of e-minis or 1000 contracts of options (500 contracts if directed routing) or any combination to generate $1,000 in IB's commissions per month, by the year end IB's commissions will almost meet or even exceed if you trade more the fee cap limitation. IMO 200+ r/t of e-minis or $1000 options contracts per month for a $50k account is quite usual and cannot be considered excessive.

Anybody has first hand experience to testify if it's true? I also think IB's FA account is perfect to manage a couple of friend's accounts and the fee cap limitation is appropriate by reading this page http://www.interactivebrokers.com/php/advisors/advisorWrapFees.php but this page does not clearly state that IB's commissions are counted toward the fee cap limitation. If it is, then all of the nearly perfect FA account designs regarding advisor fees are rendered useless (and dangerous) for any moderately active advisors.
 
most fcm/brokers will not cooperate with you in collecting fees from your friends for trading for them. most of the time, the ib/fcm has to have your DD and your advisory agreement with your client/friend before they will take money out of your friends account and send to you. you are just going to have to collect the money from your friends on your own. just don't trade for them anymore if they don't pay you. i would definately work out some sort of advisory agreement with your friends spelling out what you will get paid for and when you will get paid. friendship is more important than the little you will make. also the 15 customer rule has been mentioned. this is also an account size limitation so check that out. i think it is that you can't controll more than $150,000 total of opm without being liscensed.
 
Quote from progers82:

. you are just going to have to collect the money from your friends on your own. just don't trade for them anymore if they don't pay you. i would definately work out some sort of advisory agreement with your friends spelling out what you will get paid for and when you will get paid. friendship is more important than the little you will make..
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Would it be a viable way around the issue of getting paid if a partnership account was opened with the trader having sole authority to make withdrawals? That way, the trader would be in the position of sending his friends money, rather than the other way around. Just a thought.
 
Quote from pierson:

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Do i need to go to the trouble of getting a lawyer to draw up a contract stating that disclaimer or am i protected because they have to sign the broker agreement to give me the power to place trades.

Any help or constructive advise is appreciated,
Pierson
More...

on the application to open account, your client should check off the question; Does any other person have authority to trade this account and fill out your name. As I remember then I signed a separate form with R. Barney stating that how much he get paid for each trade and what kind of trading stratergy he supposed to follow, he didn't.

http://www.cftc.gov/files/ogc/oporders04/ogcplank072204.pdf

PS. I am not John.
 
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