Advice needed for a new RIA

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Apr 1, 2011 5:50 pm

I am planning to start a RIA to manage accounts using value strategy. I have recently passed series 66. To start with I am expecting to have $2-$5MM in the first year. I .   A few questions

1. Fees - Does this make sense

< 100K - 2% AUM

100 - 500K - 1.5% AUM

500K+  1.25% AUM

I am also giving an option for HNW individuals if they want,  they can go with performance fees structure

25% with hurdle rate of 6% with high water mark and no other fees

Having performance fees - will it be an issue to get adv approved? I do not mind removing the performance fees but few of my potential clients could ask for that option because the do not want to pay they do not get atleast 6%

2.  Soft dollar arrangement.

I am currently saying no to Soft dollar arrangement? Should I go with it or not? Does this make a difference to get a free research

3. Average fees per hour - If some client wants to review their portfolio or 401K? What is the industry standard/

$150/hr or $200/hr?

4. Planning to use IB as broker - Any thoughts

5. I want to get Capitl IQ but I came to know that it costs 25K per license per year. Any other options for fundamental data / research

Thanks again for all your help. I really appreciate it

Apr 3, 2011 4:29 pm

In my state you need 65, not the 66. 

1. agressive fee structure if you do  not have past performance, I charge 2% on everything less than 1mm and 1.5% above.  Nothing less, no exceptions.

2. performance fees might want to charge 2/20 even in down markets you have to get paid, and in down markets you should be able to minimize losses which you need to be compensated for.

3. 150/hr is pretty standard, depending of net worth of clients 200/hr might be a stretch.

4. I use IB, love it.  Great low cost platform.

5. I do all my own research, doesnt make sense to pay for it.  Maybe you feel differently.

Hope this helps