Automatic calculation of Incentive fees

Discussion in 'Professional Trading' started by R1234, Oct 18, 2009.

  1. R1234


    I manage money for institutional clients where their internal departments calculate my quarterly fees. All I do is get the check in the mail every quarter.

    Recently a retail customer has expressed interest in one of my programs. I've looked into Interactive Broker's advisor platform but it seems to only be able to deduct management fees (ie. a fixed percentage of assets) and cannot calculate high watermarks, etc.

    I could calculate the fees myself and send the retail client an invoice but it's a pain, especially if I start getting more retail managed accounts.

    Does anybody know other retail oriented futures brokers who calculate management and incentive fees on retail managed accounts and send me the fees automatically?

  2. 1) "All I do is get the check in the mail every quarter."

    You have a very very low threshold of pain. Did you show your interested retail client a serious analysis of your longterm performance? What if there is an error and this disdain for work causes you not to catch it?

    2) as to calculating fees, etc. - once you do it for one retail client, you would likely have the same percentage for retail clients, but the multiplier is based on the amount they invest. Why cannot you simply mimic the calculations already performed for institutional customers on a retail scale?

    I would be very worried being the financial customer of someone who wants to put their life on autopilot. Business involves thought and time. Hopefully you put more than this effort into the calls you make.
  3. R1234


    I'm not sure how you came to those conclusions about my work ethic solely based on what I posted.

    I often find myself working 13 hour days. And forget vacation days because I trade futures in all the major world exchanges.

    As a self employed person I have to work and perform consistently to survive. I have a mortgage payment and a wife and kid to support.
  4. Because profitably doing this:

    I manage money for institutional clients where their internal departments calculate my quarterly fees.

    does not seem consistent with this:

    As a self employed person I have to work and perform consistently to survive. I have a mortgage payment and a wife and kid to support.

    by "institution", do you mean such as financial institutions, or do you mean you actually have just a few small clients?

    and regarding "retail clients", it does not seem that much extra work, if you follow the model used in your institutional customers. It is only complicated if you set it up as complicated. You tell the retail client(s) that you are compensated exactly as your institutional clients, based on their account size.

    If you know how institutions compensate you, a Excel spreadsheet is set up and your institutional results entered, this propagates to rows of retail clients. And there are places that will handle processing of reports, payments, or issuing checks, such as CPAs. I had an S corp before, the CPA handled all my monthly, annual or quarterly obligations, such as my being my own employee, property, use, income, sales tax at the local, county, state, federal levels, basically "Here is a printed check, just mail it to this address (envelope was included) by due date X" The monthly fee I paid for them to do all this was very modest.
  5. R1234


    The problem is what I trade for the institutions is quite different from what I trade for retail, mainly due to account sizes and the instruments I'm able to trade per unit of assets.

    Although I consider my AUM somewhat decent, it has not made me independently wealthy - I continue to earn a modest living. The bulk of my clients are RIA firms paying me a percentage (a shockingly small percentage) of assets allocated to my models. Another client is a CTA paying me a percent of profits. This year has been good for the RIA models, but mediocre for the CTA models. Plus I lost my biggest RIA client last week despite being up close to 20% YTD. They decided to take the profits and allocate to another asset class. That was a big blow to my income.

    The plan is once I have some reasonable liquid net worth in hopefully a couple of years, I want to get out of the OPM business and just trade my own capital. Way less headaches to deal with!
  6. if you can make some decent coin with decent stats (sharpe/sortino, profit factor, etc.), you can sell your services at the following: (futures, options, forex) (index-related stuff - eminis, index ETFs)
    StrategyRunner (there is an option to enter signals so you do not give your logic to others)
    Futurestruth (blackbox futures systems)
    Also, brokers Attain Captial, Striker Securities track systems.

    If you are truly profitable longterm and you are not a "high frequency" trader, you can probably build up tens of thousands in subscription revenue for minimal time involvement of your own.

    You can give a system name, so your clients do not know who you are (if that matters).

    you can also build a up a track record and perhaps interest larger entities in your stuff.

    Just a thought. But a successful trader (of which there are relatively few) again, could find a nice income for a small amount of work. And it evens out dips in your own trading capital somewhat.

    If you are already generating signals, and they are fewer than several times a day, even your wife could learn to enter the trades on several of these tracking sites. These sites' main problem, is that few traders are ever consistently profitable.
  7. Let us go back to the original question as cited above.

    Does any one have any suggestions?

    I did ask Interactive Brokers to support similar feature some months ago, but they have not done that yet.....

    May be you can ask IB as well.