Managing money for others

I'm actually going through a similar situation right now and it's becoming a bit of an obstacle. I have been a retail broker for about 4 years and have been trying to get into trading for a while now but I've been looking for the right place, right people etc. I have a few clients that are eager to come on board and I've been looking for a place to do retail trading but it's becoming more of a pain than I had anticipated. I am looking to establish a hedge fund by years end and have already been lining up attorynies, accountants and even several different prime brokers but that's all going to take time and my clients and I want to begin trading now and finding a place is proving difficult. anyone know of any places that do retail trading not just prop tading?
 
SCI New York,

What exactly are you looking for? A place to trade from? What are you looking for that you don't have trading from home over the internet?
 
I might do something similar. My cousin and I want to invest in this small company called Gameznflix.com, but he knows nothing about stocks, so he's gonna give me the money to put in my account to invest for him.

LOL, I should screw him over and buy LEAP call options in ford, and tell him "Everything will be just fine". ......nah, that'd be mean. :p

cm69
 
Well, I'm looking for a firm that handles retail clients as well as prop traders, I suppose I would be interested in getting involved with a sell side firm, but to be honest I just dont know where to go. I have been to a few prop trading firms that "say" they can handle myself and clients but after a few conversations it turns into a completely different scenario and the complications begin and grow from there. I would have stayed at a retail house, but the technology just isnt there for the type of intra day trading that I do and constantly buying large blocks through multiple tickets gets to be too costly and time consuming. Flip side is the prop trading firms I've been to for the most part don't handle retail clients. I'm up in the air right now as to what to do. I'm in talks right now with another company but as of right now, sorting out the small but important details.
I've had offers from prop firms before to take me in, but they just want the volume so they can get their cut and they're not looking out for myself or more importantly my clients so I haven't taken those offers.

If anyone can help, I would hugely appreciate it.
 
Quote from SCI new york:

I'm actually going through a similar situation right now and it's becoming a bit of an obstacle. I have been a retail broker for about 4 years and have been trying to get into trading for a while now but I've been looking for the right place, right people etc. I have a few clients that are eager to come on board and I've been looking for a place to do retail trading but it's becoming more of a pain than I had anticipated. I am looking to establish a hedge fund by years end and have already been lining up attorynies, accountants and even several different prime brokers but that's all going to take time and my clients and I want to begin trading now and finding a place is proving difficult. anyone know of any places that do retail trading not just prop tading?
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and a tad costly if your trading retail type size, no? unless you have tons of retail clients of course, but then you'd be talking mutual fund or similar and thats an even longer and costlier road... what is it that bothers you / doesn't satisfy you with your current setup, or say, sthg i don't use personally but... an IB's family & friends type setup for instance?
 
Quote from SCI new york:

...I would have stayed at a retail house, but the technology just isnt there for the type of intra day trading that I do and constantly buying large blocks through multiple tickets gets to be too costly and time consuming.
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is it about the spreads, commission rates? am using institutional setups but there are quite a few "retail" shops with top shelf technology around :confused:
 
Well, at a normal retail house, getting charged on a per ticket basis gets to be pretty costly on an agressive intra day basis. Even when negotiating ticket prices down, its still expensive and doesnt leave too much room. Given example:

If im doing around 100 transactions per day minumum at a ticket of lets just say 35. On an average 20 day trading month if I keep that up, it'll cost me 70K in charges for the month, no matter size lots. Ok. My trading patterns differ pending what im trading and when, but I am not going to cut my costs by being at a retail house buying 50K share blocks of stock just to not write as many tickets. Thats just an example, but cost is key. I've had prop firms giving me offers of extremely low per share costs, but like i said earlier, they dont handle retail clients for the most part and just turns into a fiasco and all kinds of sneakiness just to get the volume.

I cant go the way of a hedge fund just yet because it's not worth it right now, cost is too high for the time being, but I have been planning to do so. But in the mean time, I'm looking for a firm that has useful tools and technology and can handle retail clients.

Right now it seems like one issue im having is the structure of the situation because although I will have power of attorney and full trading rights etc, I cant "share in the profits" due to my license, and if I were to get contracted working on a say per share basis, firms start to shy away because it could turn into churning to wind up commisions, weather the intent was there or not. I'm just trying to find a good place for myself and my clients so that we're all happy and can finally get a move on things and prepare for the first few steps of developing the fund.
 
mmmhhh... if you were not a US national, you'd go to say a UK 2nd-tier prime broker (eg http://www.odlsecurities.com/ but there are others), they'd let you manage and share into profits on a PoA basis, you could charge (disclosed) mark-ups or earn (disclosed) rebates, you wld block trade and they'd handle allocations to sub-accts automatically, you'd get proper institutional rates etc... everybody would be happy...

but from within the US and with US-based clients / nationals... yeah, if a CPO/JBO setup doesn't suit (am not familiar enough... if anyone is, plse kindly chime in), then, seems a fund is the only "clean" option... and the next question is, onshore or offshore, etc etc...

if offshore i can help*, feel free to pm me with details

all the best

* just thought i'd add, not the usual type of help... see fyi:
http://www.elitetrader.com/vb/showthread.php?s=&postid=1330834&highlight=cayman#post1330834
http://www.elitetrader.com/vb/showthread.php?s=&postid=1329395&highlight=cayman#post1329395
 
Im in the US. Going through paperwork now, been on the phone with a number of attorneys and lawyers and I think I may have found the solution. Hopefully so because in the mean time I've been seeing countless number of opportunities for some great trades. In any case, if anyone still happens to have any insight on the situation, I would be more than thankful for any ideas or suggestions. Thanks.
 
Quote from Joetrader:

Here is my own biased and probably half witted advise. If you have a good system trade it until you are wealthy or until you have the contacts to raise 20M to 30M at a bare minimum. I run a hedge fund company with a single fund. Of course there is also an offshore version of this fund for foreign investors because when you are raising 20 to 30M at a pop from each client you go to New York, but when you are starting out and you are raising 2-10M from each client you go to Geneva or Boca and meet with mostly foreign investors. So for this fund it was necessary for my law firm to form six companies (80K from a brand name legal firm) of course the two funds need an annual audit from a brand name CPA (50K min) oh and then you have to pay them to do your K-1's and you will have to hire a brand name Administrator/custodian for your funds or you won't raise a dime from institutions (70K-120K per year min). These are the folks that send out your subscription documents, accept the clients money and do all the necessary AML and compliance checks. They also take a trade sheet from you each evening and calculate your P&L using your sheets and their datafeed. Then they compare this to your prime brokers report and report any discrepancies back to you. They also prepare the monthly statements for investors and do the audit prep work. You will of course need a registered office service and most likely independent directors for your offshore fund (10K yr). We have not even begun to speak of the time, efforts, and monies spent marketing your firm. Now, if you want to spend more than 5 minutes a day trading and researching you will have to hire a couple of other people at minimum to manage all of the above. Even if you get a couple of aggressive kids right out of college you will pony up 50K each and they will know nothing. To hire a COO type that knows what he is doing and has a few contacts will take a strong 6 figure income and also a sweet enough operation pumping bags of money out your ass and ferraris in your garage to make your company appear attractive enough for that COO type to actually want to quit his job at a bulge bracket firm and come work for you.

Hey I knew I was forgetting another expense. How about 20K per bloomberg and another 10K or so of high speed lines and maybe even an OMS (100K). And since you will now have an office full of people you have to get office space. (40K yr but varies widely dont forget to include all of the utilities when estimating that price)

All of this you can buy, but there are still many things you cannot. You cannot buy the relationships you need to raise the kind of money it takes to support this. You also cannot buy your way into a prime brokerage firm with less than 50M so you will have to compete to get the account open and the folks you sell yourself to will have to be convinced that you are brilliant and connected enough to raise capital (see the bags of money statement above) or they won't even return your calls much less open an account for your funds.

In the end it sound simple, because opening an etrade account is, well, simple, but I think that after doing this I cannot imagine a more difficult business operationally speaking, not to even begin to mention that none of this matters if your returns are not consistent, stable, and high!
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I think this post paints a good picture of the potential costs associated with wanting to have a massive public presence as a money manager. But I know an excellent trader on the West Coast here who read this post and believes some of it is pure hyperbole regarding the "have - tos" and costs involved. I believed that as well, that's why I asked some of my CTA friends to read this post. One could not say it's false, but very few people will be so large as to need this kind of compliance budget. Certainly I don't agree that it's necessary to become a very wealthy trader, even if you do run other's money.

One cornerstone common to all the wealthy people I know is simplification, and investing the delta between expenses and income. Simplification meaning the intention to reduce or eliminate all costs unrelated to increasing income and investment savings. Having people on a payroll or salary in your fund is probably a bad mistake from the standpoint that it represents a fixed cost. Much better to hire a consultant for a limited time to setup a system to follow, then follow that system. I did the same thing for my complicated trading taxes back in 1999 when I got my first ever k-1. For two years I hired the same guy, got the taxes done well, then systemetized that method on my spreadsheet and have had a fantastic time with taxes for the last 6 years. I certainly don't have an accountant on my payroll. Now I am often asked to advise or consult on other trader's taxes and taxes in general. So, hire people for a limited time, learn what they know, systemetize it, then do it yourself for free. blah blah blah its late and im tired. .02
 
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