I have have just recently begun to manage accounts for various friends, family and business contacts. By manage accounts, I mean that they are depositing funds into their own account at the brokerage I use (Optionsxpress) and then signing a full power of attorney permitting me to trade the accounts and withdraw my fees directly. They have signed a managed account agreement with me which outlines the terms of the agreement. In the state of PA where I reside, I am permitted to manage five such accounts before I am required to register as an investment adviser (series 65). I was curious if those of you out there that are managing accounts might share some of your experiences. How has it been going? What pitfalls have you experienced? Has it been worth the work? What made you get into managing accounts in the first place? Any recommendations? Thanks and I wish you all continued success! Sincerely, Daryl
way to go!... and optionsxpress is a good firm i've heard... yes its a worthwhile journey no matter what the outcome may be... all the best
Good luck with everything. Once you go beyond the 5 accounts, you'll need to register with the State and then the compliance nightmare begins. In Ohio, the State audits state-based advisers every 2 years! What you will want to make sure of is that you're doing a good job of evaluating the suitability of these investments/trades for the clients. Accordingly, you'll definitely want a client information form/questionnaire which shows that you really know your clients and they really know what you're doing for them. Hope that helps.
I've been in the business for a few years. I'm no expert but I'll share a few things I've learned. Aside from the advice above, I would suggest becoming very knowledgeable about rules/regs and registration requirements and stay on the right side of things at all times. If this turns into a FT business for you at some point, you will need to make many decisions about how you want to operate and the relationships you will have with others in the industry. Keep expenses low and returns high within your risk parameters. Set expectations low and always exceed them. Be humble and gracious to those who have entrusted you with their hard earned funds. Keep a significant portion of your own funds with theirs so that your interests are aligned with theirs at all times. Feel their pain as your own and share in the triumphs.
I think if you trade future products, you don't have to register as an investment advisor in your state.
The securities commission of PA told me it was not dependent on the amount of funds within the account; rather, the number of accounts. On a seperate note, I have a friend that used to be licensed and he told me that it is not permissible for series 65 and series 7 licensed traders to take a fee out of the profit opf a managed account. He said the fee must be calculated based on funds under management. (Though he was a financial planner and so maybe he is confused). Is this correct? I thank everyone who has taken the time to comment on this thread. Your guidance has been helpful and insightful and I thank you! Sincerely, Daryl
Yip1997, if that is the case, what processs would one have to use to be able to take a performance based fee for a managed account? Thanks, Daryl