Trading as a service

[rubenhak]

Hi everybody,

I'm new to this forum. If this is not the best section to post, moderators please move this topic to appropriate category.

I have developed a trading robot which works good for me. I'm thinking about expanding it and making business out of it. The idea is to provide automated trading services to clients. The system will be using clients' credentials and will be trading on their behalf. Service will be charged mostly as a percentage of the performance and a small percentage of a managed capital. System is meant to be used for non-accredited investors, though may work equally well for accredited investors as well.

The questions are the following:

1. What are legal requirements to run such a business? Is this considered wealth management? Is it required to be fiduciary? Can you provide some hints what has to be done?
2. How to protect the business/myself from clients? There will be periods when the system will go negative. How to protect from law suits?
3. What is the most favorable legal entity to run such a business? LLC, S-Corp, C-Corp?

Thanks,
Ruben

 

[byteme]

Have you considered putting your system on https://www.collective2.com

This and other platforms and methods have been around a long time to deal with your type of scenario.

 

[Baron]

Before you worry about legal entities and other details of that nature, you'll need to put together some third party validation of your system's results because at the end of the day, that's really what matters and what most potential clients care about. If you can validate yourself via a third party such as collective2.com (as byteme alluded to above) or fundseeder.com, then you will have formed a tangible base to move forward with.

 

[rubenhak]

Have you considered putting your system on https://www.collective2.com

This and other platforms and methods have bee around a long time to deal with your type of scenario.

That is interesting. I will have to look deeper into this to decide on putting the system on collective2.

So looks like I'm trying to do something similar to collective2, except the fact that strategies are defined by my and clients do not define their strategies.

 

[rubenhak]

Before you worry about legal entities and other details of that nature, you'll need to put together some third party validation of your system's results because at the end of the day, that's really what matters and what most potential clients care about. If you can validate yourself via a third party such as collective2.com (as byteme alluded to above) or fundseeder.com, then you will have formed a tangible base to move forward with.

I've registered with fundseeder and waiting them to pull the history of my trades from the brokers.

I already have several potential investors that would want me to manage their capital. What would you recommend to do for at least minimal level of protection? How long of a track record is needed to go completely public?

 

[lawrence-lugar]

I never really understand these type of questions...
If your system is so good...then why don't you keep it for yourself and run it to perpetuity to become the richest man alive, or The Greatest trader success Story ever Told (not to sound sarcastic or anything, just sayin)

If I truly discovered, what I felt was a gold mine...I'd certainly keep my mouth shut and have it all to myself;
instead of making other people partially rich and collecting commissions on the side.

 

[Handle123]

Hi everybody,

I'm new to this forum. If this is not the best section to post, moderators please move this topic to appropriate category.

I have developed a trading robot which works good for me. I'm thinking about expanding it and making business out of it. The idea is to provide automated trading services to clients. The system will be using clients' credentials and will be trading on their behalf. Service will be charged mostly as a percentage of the performance and a small percentage of a managed capital. System is meant to be used for non-accredited investors, though may work equally well for accredited investors as well.

The questions are the following:

1. What are legal requirements to run such a business? Is this considered wealth management? Is it required to be fiduciary? Can you provide some hints what has to be done?
2. How to protect the business/myself from clients? There will be periods when the system will go negative. How to protect from law suits?
3. What is the most favorable legal entity to run such a business? LLC, S-Corp, C-Corp?

Thanks,
Ruben

In order to charge percentages and once you get over $450k I think it is, you have to become a CTA which requires a test, then you get yourself a very good lawyer who make all the documents, get very good CPA cause you will be dealing with checks and wire transfers, if you going to advertise across states, am not sure if there is more registrations and more lawyer time. You don't want to have less than $50k accounts as people be calling you cause rent is due, people will try to call you all the flipping time cause they are scared. And you doing all this for a lousy 20%? And yes, lawsuits are pain in the ass and every continuation is going to cost you even more lawyers fees cause they didn't make the exact same amount you are advertising or some other trivial bs. Even when you win, you lose.

Get like a three year trading record then shop yourself to do institutional fund manager, trading individual accounts huge pain in arse.

But if it really good system and you stick it on collective 2, you have to tell them I believe how it generates signals, and eventually really good traders subscribe for free trial and figure out what you doing.

If it be me, just trade it yourself and make 100% of funds.

 

[Baron]

@rubenhak If you want some professional guidance and assistance through the entire process, then I recommend Michael Coglianese CPA, P.C.

 

[rubenhak]

I never really understand these type of questions...
If your system is so good...then why don't you keep it for yourself and run it to perpetuity to become the richest man alive, or The Greatest trader success Story ever Told (not to sound sarcastic or anything, just sayin)

If I truly discovered, what I felt was a gold mine...I'd certainly keep my mouth shut and have it all to myself;
instead of making other people partially rich and collecting commissions on the side.

I'm slightly surprised to see such a response as I didn't provide any numbers regarding the system performance. The purpose of the system is not to become the richest man, but to produce passive income for myself and close friends. Another way to scale is to make business out of this, which I'm trying to do in addition to running it for myself. I don't think I will have so many customers what would affect strategy performance. So it shouldn't be an issue.

Since I talked about performance, the system does not make phenomenal returns. Its target is 10% annual. It is not "so good" and a "gold mine", but a good way to grow the capital.

 

[rubenhak]

In order to charge percentages and once you get over $450k I think it is, you have to become a CTA which requires a test, then you get yourself a very good lawyer who make all the documents, get very good CPA cause you will be dealing with checks and wire transfers, if you going to advertise across states, am not sure if there is more registrations and more lawyer time. You don't want to have less than $50k accounts as people be calling you cause rent is due, people will try to call you all the flipping time cause they are scared. And you doing all this for a lousy 20%? And yes, lawsuits are pain in the ass and every continuation is going to cost you even more lawyers fees cause they didn't make the exact same amount you are advertising or some other trivial bs. Even when you win, you lose.

Get like a three year trading record then shop yourself to do institutional fund manager, trading individual accounts huge pain in arse.

But if it really good system and you stick it on collective 2, you have to tell them I believe how it generates signals, and eventually really good traders subscribe for free trial and figure out what you doing.

If it be me, just trade it yourself and make 100% of funds.

The thing is that I don't want to deal with checks and transfers. Instead planning to trade on behalf of the investor. So from the system point of view it will be just charging the debit/credit card a monthly fee. Essentially collective 2 is doing the same thing. How are they dealing with all those troubles?