Starting a company to manage funds?

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Jul 30, 2009 10:52 am

Hey everyone,

 
I have been in the market for 8 years and have had a few people tell me I should start a company and they would give me some money to manage for them and i could take a percent of the profits. I did some research on the topic and it looks pretty complex.
 
My plan was to open one account, pool all the money together, each deposite had to be in $2,000 blocks to keep things simple. Then whatever % gain the portfolio had would be what the individual would have in return. If my portfoio went up $10,000 (10%) someone that had 2,000 they would now have $200 and someone who deposited $10,000, they would have another $1,000. Would this be possible? Im currently studying for the 65 licence so i could charge for the service but do i need the series 7 or 66? Im looking to start a LLC to protect myself as well.
 
Thank for the help,
Matt
Jul 30, 2009 10:54 am

If that is your plan, you're going to need a lot more than an LLC to protect yourself.

Jul 30, 2009 11:13 am
Moraen:

If that is your plan, you're going to need a lot more than an LLC to protect yourself.

 
Like what? I figured i would see a lawyer when i was near the end. I basically wanted to just see if it was possible to manage someones money in an account like that without getting a series 7  since you need sponsorship for that?
 
 
Jul 30, 2009 11:31 am

You could start an investment club and divide the ownership into units.  You can't keep the other members profits though...

Jul 30, 2009 11:42 am

Matt,

I suggest seeing a consultant that specializes in this.  You are basically talking about forming an RIA.  There are regulations involved, you need to affiliate with a custodian for the assets, you need a series 66 (I think just that one?).  On top of that, you are running a business.  You need software, systems, etc.  And trying to explain everything to someone with NO industry experience is hard.  But since it appears that you have no industry experience, you might want to talk to someone first.
Jul 30, 2009 11:49 am

Please talk to someone first!!

Jul 30, 2009 11:51 am

matt - PM me and I'll send you some people to talk to. You need to know what you are getting yourself into.

Jul 30, 2009 11:53 am
B24:

Matt,

I suggest seeing a consultant that specializes in this.  You are basically talking about forming an RIA.  There are regulations involved, you need to affiliate with a custodian for the assets, you need a series 66 (I think just that one?).  On top of that, you are running a business.  You need software, systems, etc.  And trying to explain everything to someone with NO industry experience is hard.  But since it appears that you have no industry experience, you might want to talk to someone first.
 
thanks,  yea i check on the RIA and thats where i got into some issues. I was wondering if it was possible to do this without having to be a RIA? Like you said you need the series 66, but inorder for the 66 to be valid, you also need the series 7...thats my issue. I might have to start with another firm to get that and then see if it would be possible from there. These SEC laws are crazy. I guess its a good thing but not when your trying to start a small portfolio and get off the ground. It seems like there motto is "go big or go home"  they dont let any small guys join the business
Jul 30, 2009 12:27 pm

You only need a 65.

Jul 30, 2009 12:27 pm
mattman2724:

These SEC laws are crazy. I guess its a good thing but not when your trying to start a small portfolio and get off the ground. It seems like there motto is "go big or go home"  they dont let any small guys join the business

 
Those rules are there for a reason, my friend. 
Jul 30, 2009 12:29 pm
mattman2724:
B24:

Matt,

I suggest seeing a consultant that specializes in this. You are basically talking about forming an RIA. There are regulations involved, you need to affiliate with a custodian for the assets, you need a series 66 (I think just that one?). On top of that, you are running a business. You need software, systems, etc. And trying to explain everything to someone with NO industry experience is hard. But since it appears that you have no industry experience, you might want to talk to someone first.


thanks, yea i check on the RIA and thats where i got into some issues. I was wondering if it was possible to do this without having to be a RIA? Like you said you need the series 66, but inorder for the 66 to be valid, you also need the series 7...thats my issue. I might have to start with another firm to get that and then see if it would be possible from there. These SEC laws are crazy. I guess its a good thing but not when your trying to start a small portfolio and get off the ground. It seems like there motto is "go big or go home" they dont let any small guys join the business





Another route. Call your Secretary of State, Securities Division. Whether they will help you or not, it's not bad to stay in touch with those guys.

Jul 30, 2009 12:36 pm
Moraen:

You only need a 65.

 
So if I do get my series 65, I can open an account at say tradePMR? Im not going to advertise saying i am a RIA. I just want to invest a few friends money. In the future I will look into gaining more clients but for right now im just looking at doing this for a few family friends.
Jul 30, 2009 12:42 pm

yea I did call them but I didnt get a clear answer from them. I am also in MI and they said they are changing the rules starting Oct 1st and to call back then...

Jul 30, 2009 12:47 pm
mattman2724:
Moraen:

You only need a 65.



So if I do get my series 65, I can open an account at say tradePMR? Im not going to advertise saying i am a RIA. I just want to invest a few friends money. In the future I will look into gaining more clients but for right now im just looking at doing this for a few family friends.





Have you spoken to Fred yet? Once you have your 65, you will still have to register with the State (hopefully your family and friends are in MI) as an RIA. Do yourself a favor, call Zachary Gronich at RIA in a box. He knows his stuff.

Jul 30, 2009 1:49 pm

Thanks for the help moraen, ill check that RIA in a box you refered to

Jul 30, 2009 4:49 pm
iceco1d:

Matt,

 
You're asking for trouble.  You've done all the research, and you are learning...but if you don't fully intend on managing at LEAST $5MM (probably $10MM), you're going to operate this endeavor @ a loss.
 
I do plan on managing that amount in the near future. I am new to this idea and just trying to get all the info I can to make the right decision. Why do you think I will oporate at a loss? I know there will some some start up costs due to licencing and other forms that will need filed but what other costs do you think I would incur? I would not be leasing a building yet and would be the only employee. I think i read you need to update a form yearly which im guessing has a fee near $100 but what other costs would I have? Thanks for the help and appreciate the advice.
Jul 31, 2009 8:56 am

Thanks ice,


That response is what i was afraid of. It looks like I might have to put this idea on the backburner for a year or two until I get some more experience in the field. Ill look into getting an internship next summer with a RIA to see exactly everything involved. Ill save all the advice ive recieved and pull it back out in a few years. In the mean time ill keep on eye on this forum, there is some great advice I know ill be able to use.
 
 
Jul 31, 2009 9:09 am

The fact that you have no idea that what you described in your initial post is called a HEDGE FUND, makes me shake my head.  Sir, you have a lot of research and learning to do.  This is no small endeavor.

Jul 31, 2009 2:18 pm
iceco1d:
mattman2724:

Thanks ice,


That response is what i was afraid of. It looks like I might have to put this idea on the backburner for a year or two until I get some more experience in the field. Ill look into getting an internship next summer with a RIA to see exactly everything involved. Ill save all the advice ive recieved and pull it back out in a few years. In the mean time ill keep on eye on this forum, there is some great advice I know ill be able to use.
 
 
 
No problem.  If you are genuinely interested in the retail side of this field, and dealing directly with individual clients, you should stick around this forum and read/learn what it's all about.  You can learn a lot here.
 
 
Yea ill definitely be hanging around. I spend about 3 hours on here last night reading through some different topics. I have a lot to learn but I dont give up, so eventually i know ill be able to make it. I was able to teach myself the stockmarket starting at age 12 and the past few years ventured out of stocks and moved more to options and forex. I have a pretty good understanding of how the market works. I still need to learn a little more about bonds and  the other part of being a RIA which is dealing with the clients, and all the legal aspects of being a RIA.
 
I just found out my aunt is neighbors with a RIA so ill be getting in contact with him sometime this week to see if he would be able to help me as well.