Raising seed money is difficult but once you get off the ground and begin turning profits raising additional capital is very easy. In fact, the money will find you.
Also, not all states have harmonized their rules with the SEC family office stuff so you need to carefully check the statute and regulations in your own state and/or consult a local attorney before offering those services to family members too.
Just talked to a person from IB, and he said that under the IB friends and Family account, if you are going to charge fees and be unregistered, they are capping you at 5 managed accounts. Previous poster mentioned that the exemption of the requirement to be registered was repealed recently under Dodd Frank. Guy from IB seemed to suggest this applied to situations where AUM was from 25 to 250mm. Not sure though. Really 5 accounts is next to nothing. Even 15 accounts is not that much considering I don't have any rich friends.
so, how are you guys doing on getting insurance? e&o/d&o seems to be the killer, so your business structure is ultimately going to be shaped by the level of premiums you can afford.
For people trading smaller amounts of other people's money usually the laws of the state(s) involved will govern what you can and cannot do. Each state has its own securities laws and regulations in addition to the federal stuff.
e&o/d&o has been killer for me i wont start trading OPM without appropriate indemnity and I don't have enough capital-commitments to cover these premiums. low premium policies ($2-$3k) are written for RIA's managing separate accounts, and won't cover you in a fund structure. Fund management policies seem to start at $10k.
That seems worth it though, esp. if one is serious about growing and creating a real business out of this.