@Felix168 that's exactly what the lawyers told me. If I'm going to get a % on the profits, I could even be configured as a Broker... But if you're offering a service that makes 15% a month, how can you don't charge any money? Any other legal solution? I've seen this company https://trade.collective2.com/#home that is charging a flat rate and this really helps instead of charging on transactions/profits.
Trading as a service
- Thread starter rubenhak
- Start date
I believe it doesn't matter how exactly you calculate the fees, you are in the business of providing investment advice no matter what.
Charging a fee off of profits, is a bit of a legal challenge, so generally you want to stay clear from that. Typically you will charge either a flat fee, or a fee based on the assets under management. It will be hard to work around these regulations, and in my opinion these are actually for the greater good.
So, if you want to provide trading as a service, go do it - but follow the rules.
FWIW, I have a registered investment adviser firm doing just that: https://www.bertram.solutions/
Charging a fee off of profits, is a bit of a legal challenge, so generally you want to stay clear from that. Typically you will charge either a flat fee, or a fee based on the assets under management. It will be hard to work around these regulations, and in my opinion these are actually for the greater good.
So, if you want to provide trading as a service, go do it - but follow the rules.
FWIW, I have a registered investment adviser firm doing just that: https://www.bertram.solutions/
- first, you start registering your investment adviser firm with the FINRA, this process will utimately lead to filing an ADV. No need to complete this right now, but you need a CRD number for your firm.
- once you have started the registration, you sponsor yourself through this (incomplete) firm for your Series 65, by filing a U4, and getting a CRD number for yourself.
- concurrently, you start registering your firm. There are specialized attorneys out there, some of them doing this for a flat fee of somewhere between $2k and $3k
- your firm will need to be registered with the state in which you have your office. Assuming you have less than $100M under management, you don't register with the SEC. It will take around 3 months and several rounds with the state until your firm is registered
- once your firm is registered, and you have passed your Series-65, you are ready to go
- probably you will want to isolate the registered investment adviser from your personal life by putting it into an LLC. If you do so, you will want that LLC ready to go before you start registering with the FINRA. Takes about a month.
- probably you will also want E&O insurance. This thread started with trading as a service... so finding insurance that supports what you want to do might be a bit tricky. Also, you might need to adjust your methods of trading, as well as the instruments traded to what you can get/ afford insurance for.
As mentioned before: you can, but it is more of a challenge. Start simple, and build on that... that's why I recommend starting with charging a non-negotiable fee based on assets under management.
Ok, so costs apart, the big obstacle is the exam to become a financial advisor, right? I've tried to do a simulation, but since my investments are only on US Stock market, tons of questions were meaningless to me (Bonds, Accounts, etc.), so I guess I have to study everything even if I don't care of those parts.
The series 65 really isn't that hard. I am a bit nervous about the topics you don't care about though. As a financial adviser you have a fiduciary duty to do what's in the client's best interest. That will probably involve a bit more than just running a stock strategy.
The bigger part of the exam is actually about laws and ethics in the context of investments... and you absolutely should know about these.
The bigger part of the exam is actually about laws and ethics in the context of investments... and you absolutely should know about these.
I believe I was referring to Series 7 exam before, not 65. I've also found this "Any person developing or designing an algorithmic trading strategy or overseeing such activities must pass the Series 57. Requiring Series 57 ensures that someone at a firm can identify and register as having knowledge of—and responsibility for—the trading strategy and technology used. " - source. So I guess Series 57 must be taken, but if it doesn't overlap with Series 65, I think anybody who wants to provide "Trading As a Service" has to take both. I'm still studying, but if anybody knows the answer, please write something. Thanks!
Regarding Series 57: I would need to spend more time figuring out who exactly needs this. It seems to me it is more geared towards intraday strategies than slightly longer term investment strategies.
Regarding learning material: I recommend using an exam prep program, e.g. from Kaplan Financial.
Regarding learning material: I recommend using an exam prep program, e.g. from Kaplan Financial.