Managing money for others

Vhehn or others - are there other brokers who have a simple FA or separately managed account services competing with IB?
 
Don't be afraid to start a f&f account funded with familiar money. Do your homework, focus on your strategy, let your f&f clients fund their accounts and trade your strategy! There is good transparancy using the IB f&f account, every client can see the statements etc. Make sure you have a good advisor/client contract.
When you think about trading other peoples money I asume that you have some confidance in your tradingstrategy. When you have, why be affraid to trade?

I started a f&f advisor account (professional) recently with money from friends and family. They knew what I was doing and were all interested. In many countries (I heard) there are legislation-exempts for managing individual accounts funded with an initial euro 50.000,-

All participants have sufficient money and they have come to where they are now by starting somewhere a long time ago. Now you're starting something and youmight need some help to build a record. Provide them with solid information and when they understand the risk they might see it as a good opportunity. I prefer to have entrepeneurs as my clients because they understand the risk of business and have all been at the same place where I was when starting up.

Everyone has to start somewhere and by using a f&f account you'll have IB do your administration for free, everyone has acces to their accounts, no client/advisor funds get mixed up and you also (in my opinion) have a good broker too.

I used to trade for my own account. But having a little nice family to support I wanted to scale out. Now I am trading my own account and other accounts using the same strategy. I started with just some people well known and as a result of good performance they started talking and that's all you need to grow.
 
Quote from dozu888:

I agree on this one.... if you are managing small money among friends and family, no need for any legal structure really...
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What is considered small money? I think CFTC steps in if you manage more than 15 accounts with a total of over 400K in them total.

Can we charge a fee for managing our family and friend's accounts? How much should we(CTA's) charge for managing accounts? What is the going rate?Does this money automatically get deposited into our account from their account?
 
Quote from nzbryant:

I would be interested in all ideas people have for structures to manage money for others, not just in the U.S.

For example:
1) Client opens own account, you manage with power of attorney. You send invoice for fees.

2) Pay lawyers and start a proper fund with offering memorandum etc.

3) any others?
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First and foremost, you need to hire a securities attorney who is experienced with hedge funds and proprietary trading arrangements.

Option 1 is not scalable in my opinion.

Option 2 has a high start-up cost (>$20,000.00 USD), and high ongoing costs associated with compliance. The advantages include maximum liability protection, the ability to take on a large number of third party investors, and the ease of raising funds through existing channels.

Option 3 would be a form of proprietary trading entity (LLC, partnership, or otherwise). This kind of vehicle is well-suited to developing an auditable track record, getting leverage through pooled assets if you have only a small number of partners, and affords some liability protection. Start-up costs are small to moderate, depending on the complexity of your operating agreements and number of partners ($5,000 - $10,000). Hedge funds often start this way with the initial partners' capital, and then run for a year or two before taking on third-party investors.

Again, I will stress to you the importance of having experienced legal counsel. Beware of companies offering "turn-key" hedge fund or proprietary trading packages, as the agreements are often not worth the paper on which they are written.

-segv
 
Quote from volatilitypimp:

Joe,
You sure are painting a pretty bleak picture for folks looking to open up a boutique shop.

I see these cap intro expo's all over the place. I am thinking of going to new yawk in a few weeks to one of these. It seems to walk you through the entire process from pre-launch to up and running. Have any of you been to one of these things? Does it provide value for up and comers? I can't beat the price (free), not to mention the exposure to investors and the whole process. I guess it couldn't hurt me any Here is the link.

http://www.business-meetings.co.uk/default.asp?page=2000&eventrelation=public&event=917
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Beware of the "turn-key" vendor, because you are paying a maximum price for a minimal service. The "turn-key" vendor's business relies on high volume. When you show up to the sheep-shearing booth at the expo, you are going to get sheared.

As another poster indicated, the "big firms" will not even talk to you unless you have $20,000,000.00 for them to stick their proboscis into. You cannot play at that table, yet. My suggestion to you is to go and find outher boutiques with reputable management who want your long-term business. Find an attorney or accountant who just left his or her "name brand" firm to strike out on their own. Find other entrepreneurs and meet them face to face. Work with them, offer them referrals, offer to be a case study. You can get a lot more done for a lot less when you work with motivated people.

-segv
 
Quote from segv:

Beware of the "turn-key" vendor, because you are paying a maximum price for a minimal service. The "turn-key" vendor's business relies on high volume. When you show up to the sheep-shearing booth at the expo, you are going to get sheared.

As another poster indicated, the "big firms" will not even talk to you unless you have $20,000,000.00 for them to stick their proboscis into. You cannot play at that table, yet. My suggestion to you is to go and find outher boutiques with reputable management who want your long-term business. Find an attorney or accountant who just left his or her "name brand" firm to strike out on their own. Find other entrepreneurs and meet them face to face. Work with them, offer them referrals, offer to be a case study. You can get a lot more done for a lot less when you work with motivated people.

-segv
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Great advice, Thank you segv!

-vp
 
Vpimp,

When U commin to chitown??? I'll introduce you to my guy. Show him yer shit, U might get a chance to actually pimp some vols.

chitown beats yellojackettown any way :D

happy 4th!!!

Why did'nt u call me back Fri?

tp
 
Ever been to a restaurant that you could tell aspired to be first-class, but that had bread crumbs or fingerprints all over the menu? Or the waiter stuttered or was nervous when reciting the specials? Starting a business with a subterfuge that is transparent or slipshod in appearance will cost you more in the long run (the entire business) that ponying up the extra dough to do it right initially.

Everything in business FIRST about appearance and impression and, SECOND, execution. If you can't appear to be competent, very few people will ever give you a chance to actually prove it.

So, I respectfully disagree with the below post.


Quote from CPTrader:

The general thrust of Joetrader's post is accurate...however, it (starting afund with less than $20M) can be done without the US$20M AUM. I’ve learnt in my life not to focus on why something CANNOT be done, but why it CAN! That’s my personal philosophy.

Legal Firms: There are many solid legal firms that will charge less than the 80K from a "brandname firm" and from my experience many of the law firms - brand name and non-brand name don't care about you, have boiler plate docs which they just modify for you. Frankly in this era, one (any smart person who has done some research ) can modify any existing offering memo to create theirs, because this is what the lawyers do anyway. I hired a brand name firm in the BVI, paid less than 80K, but have been quite disappointed with their work. I had to make substantial edits to their work, was the victim of a bait and switch from their vis-à-vis the fees, etc./ and have jus been thoroughly non pleased. All my docs were boiler plate docs, and I found myself correcting them, and like I said making substantial edits. I’ve seen many an offering memo and know the general structure/requirements and there is nothing incredibly specialized in preparing an offering memo, if you know what you want/need. Legal advise is always good, but legal advice is also typically generic for similar/vanilla situations. Setting up a vanilla offshore fund has been done tens of thousands of times and the docs for this exist everywhere…is this really worth $80K? NO, NO!!

Administrator: As for the need for Administrators. yes many of the top administrators require minimum of 50K p.a. to bring you on board. I even heard that some now require 100K and if you were a prior client paying less than $100 p.a., they politely tell you to take your biz, elsewhere. And some of these so called brand name firms, use recent college grads with minimal experience to do the work..the result lots of errors. Again, unless you are trading exotic OTC instruments, administration work can be frankly done in-house or even with software. After all, every Administrator uses Advent or some variant of same to do your reporting. But again, there are many good firms that charge less and now even some software/ASP providers that cost you a minimal amount.

Prime Brokers: Many of the top ones require 20-50M to even talk to you and even then may require you do all your biz with them. But again, there are a few good PBs that aren't so AUM selective. There are many very good introducing PBs. GSEC (formerly SLK) will talk to you with even $2M, maybe even $1M. If you are in futures MAN will take you on with AUM in the 6 figures. Calyon & Fimat require you to have at least $1M. So it can be done. Frankly for a pure futures trader, Calyon, Fimat and Man are better shops than Morgan, Bear Stearns or Goldman Sachs. For a pure long short equity guy, GSEC or Merlin or Grace Financial or MS Howells are great places. You can still have the cachet of the GS name via GSEC (the old SLK). If I had enough AUM to choose any broker would I switch form my current PB, NO. They treat my small account as if it’s a $1B account and I get all the service I need. Now a Barclays Capital, UBS or Credit Suisse can provide me greater electronic access, access to exotic OTC instruments and probably better in house reporting, but this is a bonus NOT a necessity. So when my AUM does increase, I’ll open accounts with Barcap, CS and/or UBS, just to have options but I won’t leave my current PB, due to loyalty and the great service I get from them. You have to respect and be loyal to a house that treats you well, when others won’t even return your phone call.

Audit: Again, many good shops provide an audit for less than the steep fees the big four charge. Again do you research and NEGOTIATE. These prices aren’t the 10 commandments.

Summary, if you have a viable strategy, STRONGLY believe you can generate performance and have a clear business plan and have enough assets to run your strategy AND are prepared to live frugally, WORK 24/7 then go for it. Don't let all these imaginary hurdles of $20M minimum AUM prevent you from pursuing your dream.

In essence, the key is do you have enough assets to demonstrate your strategy, a valid strategy and the desire to work hard to excel NOT having a certain AUM threshold.

As proof, I’m doing it...it's tough, very tough, I have frustrating moments, but I know outstanding success will be mine!

I wish you all success!

P.S. Raising assets will depend on your performance AND your marketing skills. Therefore it is key to develop a track record in a fund structure, no matter how small that fund is. Don't trade your assets in a personal account with the intent to start a fund when you turn your grubstake into $20M. The reason for this is that if the track record is not for the fund, it will be HEAVILY discounted by potential investors.

P.P.S. As for the cachet of big name firms, it’s another myth. Investors want honorable fund mangers with good viable strategies. Period. Having GS or Morgan Stanley as your PB is not going to generate you returns, nor necessarily prevent fraud. A fraudulent manager will find a way to commit fraud no matter who are the service providers. Wise investors know this. Dumb investors don’t. and you don’t want dumb investors, the kind of investors s who are herd followers. If you have no-name service providers, will that prevent you from landing that 20M investor, no…as long as you can explain why you hired those no-name service providers initially. And when the large investors do come in, if you want to change service providers, you can always do so. The key is having a valid story and the confidence to convey this to potential and existing investors.

P.P.P.S. A key nugget here expressed succinctly: Aim to build a skyscraper but start building it floor by floor from the foundation up. Don’t attempt to build the skyscraper on day one, because all your neighbors have skyscrapers. If you do so, with no foundation, your skyscraper will just collapse!
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Poor analogy.

Haven't you ever been to a 5 star restaurant or hotel in name with great appearance but awful food and mediocre service. Smart people go for substance NOT fluff. Those who go for fluff, typically get in trouble.

Using SRZ or Akin Gump as your law firm does not guarantee yoru hedge fund success. Using MS or GS as your prime broker also does not guarantee you success. If you can afford Akin Gump or GS ab intiio, wonderful, go for it. If you can't there are several other alternatives that will meet your needs without violating your fidicuary duty or jeopardizing your business.

Also I am not advocating and I have said this before, that someone deliberately cut corners and avoid necessary business development tasks. All I counsel is to have a biz plan, a game plan and be creatve enough to boot strap or improvise when you need to while still mainataining a clear vision of success.

There is a salient yet subtle point here. Some may see it, some may not. That is OK.

Quote from FaderTraderr:

Ever been to a restaurant that you could tell aspired to be first-class, but that had bread crumbs or fingerprints all over the menu? Or the waiter stuttered or was nervous when reciting the specials? Starting a business with a subterfuge that is transparent or slipshod in appearance will cost you more in the long run (the entire business) that ponying up the extra dough to do it right initially.

Everything in business FIRST about appearance and impression and, SECOND, execution. If you can't appear to be competent, very few people will ever give you a chance to actually prove it.

So, I respectfully disagree with the below post.
More...
 
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