After talking about getting into the stock market for years a friend and I opened a tdameritrade account and funded it equally. I was left in charge of managing the account and do all the trading. The account has done very well in the three years we have had it. My friend recently approached me and insisted that he pay me some commissions on the gains in account. We had never really had that discussion when we opened the account because we were just trying it out and we never imagined it would go as well as it has. Plus since 50% of the money in the account is mine, my feeling is I would have put the same amount of time and effort into the regardless of whether his money was in the account or not, so It never really dawned on me ask for a commission. I am sure there a many people here who have this kind of arrangement or something similar. Can you guys please give me an idea of what you guys charge? Thanks in advance
If he is your buddy I say convince him to just split profits 50/50 and let him buy you and your family dinner one night. Its cool he is a stand up guy and wants to pay you a cut, but if things turn south in the future that extra commission he paid you could bring some tension in your friendship. Dont let money get in the way of good friends. Just my 2 shares.
yeah in this case he is not your client he is your friend, he's buying the drinks fri night and he'll take the fat chick But personally, I would take 10% of his profits lol
You guys might also want to think about what you do in the event that things ever go south. Friends might get a little irate if one of those "black swan" type events decides to wipe 90% of your last 3 years profits (or "gasp" some of your principle) in the span of a week or two. Also, sounds like you are also responsible for the tax liabilities if the account was opened in your name?
You can let him make the decision. In any case you could let what you get ride and compound it. As time passes, more and more of the account is yours and he is making just as much as before. In my experience, have had the max POA's allowed as an amatuer and done as above. Later, when the accounts got large, thay could be handled without me around. At that time I forfieted my share and past commissions as a means of insuring the other person would be batter able to continue to contribute professional time*. They did, it turns out. that was my goal: to spread professional talent and time into places where it would not reach before (recipients could not afford professional care otherwise.) Google Roark for his decent distain of my orientation. My transportation, in part, is a 12 cyinder very high class family transportation. Luckily it has three autoamtictransimissions and I can burn rubber at any speed in the "sports" setting. Most often I just leave rednecks and their pickpus behind if they ride me or test me. I've never ask a person to give me a POA but I always ran at the NFA limit (15) and for years was cited for insider trading on those accounts. The persons I trader for were happy that I had such a nice rating by the sEC and that the SEC had to withdraw their mistakes as time passed (years). Footnote: consider giving your "commissions" to a worthy cause like Habitat for Humanity. *20% per week was the professional time contributed. There are two things involved: the capital POA'ed and the velocity of making money. 20% of a professional salary doesn't take long to create with a few busks. when that is exceeded, then wealth is also being built. After a while a financial planner can take over and just maintain the wealth building. During that time my best one day net was 17points on 100,000 shares. Taht return covers 20% of almost any professional slary for the people involved.
That's what hedge funds charge strangers. I would think 1% of assets managed per year might be more appropriate for a friend.