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Info on starting to managed account

  • #1
  • First Post: Mar 17, 2008 4:25pm Mar 17, 2008 4:25pm
There are two previous threads on this but they were back in 2006-2007 with just a taste of information. I would like to start another thread for up and coming account managers. Any POSITIVE input is greatly appreciated.

I have some potential clients, and have some winning strategies. (Don't ask for results, backtests, etc.) I do know that at some point a series 3 license will be needed, but not necessary to start. I am also aware of the requirements of the NFA. The purpose of this thread is not to prove my credibility as a trader, but to find info on :

1. Which brokers offer the most comprehensive packages. (ECN"S are better I know, but who are you using and why?) hotspotfx, InteractiveBrokers, etc. 2. PAMM vs LAMM
3. Types and amounts of returns promised to clients. (contractual set ups)
4. Other legal info that required... besides a good tax person and accountant.
  • #2
  • Mar 17, 2008 5:08pm Mar 17, 2008 5:08pm
So you are actually going to promise returns to clients?

I think what you need above all is a good lawyer..
  • #3
  • Mar 17, 2008 5:10pm Mar 17, 2008 5:10pm
Quoting shrike
So you are actually going to promise returns to clients?

I think what you need above all is a good lawyer..
If I Go Broke Trying Then I Will die happy.
  • #4
  • Mar 17, 2008 5:37pm Mar 17, 2008 5:37pm
Quoting shrike
So you are actually going to promise returns to clients?

I think what you need above all is a good lawyer..
The initial idea was to split profits 50/50 with clients aside from what they invested. We take over the account for 90 days, continue to pay a monthly percentage after the initial 90 days.

For the record, I am not soliciting for service, just trying to find out more info on the legal way to go about this.
  • #5
  • Mar 17, 2008 5:56pm Mar 17, 2008 5:56pm
The 'usual' fee structure for a hedgefund is 2/20 (mgmt and performance fee). 50 is completly nuts..

You absolutly need a securites lawyer to set this up, even (esp.) if you want to manage funds from friends/family (dont rely on forums..). You also never promise returns to clients (you make disclaimers instead, a lot of them).
  • #6
  • Mar 17, 2008 6:01pm Mar 17, 2008 6:01pm
Quoting DollaBill
The initial idea was to split profits 50/50 with clients aside from what they invested. We take over the account for 90 days, continue to pay a monthly percentage after the initial 90 days.

For the record, I am not soliciting for service, just trying to find out more info on the legal way to go about this.
you want to splt 50/50 of the profit are you crazy, you realy have a lot to learn, you wont get it here.
If I Go Broke Trying Then I Will die happy.
  • #7
  • Mar 17, 2008 8:38pm Mar 17, 2008 8:38pm
Quoting shrike
The 'usual' fee structure for a hedgefund is 2/20 (mgmt and performance fee). 50 is completly nuts..

You absolutly need a securites lawyer to set this up, even (esp.) if you want to manage funds from friends/family (dont rely on forums..). You also never promise returns to clients (you make disclaimers instead, a lot of them).
Thanks for the answer. Like I said, 50/50 was an idea, not writing in stone. I'm smart enough to know that that won't work.
  • #8
  • Mar 17, 2008 9:04pm Mar 17, 2008 9:04pm
Quoting DollaBill
I do know that at some point a series 3 license will be needed, but not necessary to start. I am also aware of the requirements of the NFA.
Thanks for starting this thread but I'd like to back you up just a bit please. Can you expand a little on the series 3 license? What's the best way to go about getting it? What are the best resources for studying prior to exam? What other licenses are recommended, if any? What are the NFA requirements? Thanks in advance.
  • #9
  • Mar 17, 2008 9:57pm Mar 17, 2008 9:57pm
i remember back in the day you had to be sponsor by a broker for a series 7 i don't know about the series 3
If I Go Broke Trying Then I Will die happy.
  • #10
  • Mar 17, 2008 10:41pm Mar 17, 2008 10:41pm
Quoting opie999
Thanks for starting this thread but I'd like to back you up just a bit please. Can you expand a little on the series 3 license? What's the best way to go about getting it? What are the best resources for studying prior to exam? What other licenses are recommended, if any? What are the NFA requirements? Thanks in advance.
Here is a link to previous threads on this discussion.
http://www.forexfactory.com/showthread.php?t=44868

A series 3 license is a commodities and equity license. Pretty much it has nothing to do with FOREX. But it covers the handling of money. It is not necessary, but helps in the legitimacy of your business. Just do a google search and you'll get a couple of websites that have info on it.

For the most part all you need to get started is a proven strategy, LPOA (limited power of attorney) between you and clients, A broker who will set you up to manage accounts without a series 3, and some willing clients.

There's some minor intricacies that I left out, but you'll find those in the thread that I posted.
  • #11
  • Mar 18, 2008 1:21am Mar 18, 2008 1:21am
Here's some more info that I found This is an excellent eBook! Kind of explains where folk get the 95% of traders lose theory from.
Attached File(s)
File Type: pdf Money_Management_Report.pdf   555 KB | 1,030 downloads
  • #12
  • Mar 18, 2008 10:38am Mar 18, 2008 10:38am
Thanks again, DollaBill. Very informative.
  • #13
  • Mar 18, 2008 11:14am Mar 18, 2008 11:14am
There are a lot of things you should do before managing money. However, if you had a client or two who want you to trade their funds today you could get it done today. FCM's or FDM's have their own qualifications you have to meet in order to manage money. However, if you dont have a website they will most likely set you up immediately. They will ask you to fill out a few pages that they keep for their records so they have some basic information about the money manager. Most of all they want to know how you solicit your clients and what you tell them (like if you guarantee profits...thats a no no.) They will ask you for a valid ID as well. Once they have everything on file and their compliance department approves it which they will unless you give them some reason not too. Then your clients complete the FCM's or FDM"s account opening agreement docs. You and the client will both have to come to terms (profit sharing, management fee, commissions) and then you both sign the LPOA (limited power of attorney.) The account is then opened and the client can fund the account. The money manager will have the ability to group all of his clients together and trade all of the accounts from one platform (formally known as an M-Account.) It truly is that simple.

The NFA as of right now has no regulation over the spot OTC fx market. They do have some control over the FCM's or FDM's (Forex Dealer Member) and they way they conduct business. As of right now if you want to be an IB or act as a CTA (manage money) you do not need to be registered with the NFA. Coming soon to a forex broker near you; all IB's and CTA's will be required to be registered as such for the forex market. Once the farm bill is approved this market could change very drastically as the CFTC and the NFA will be given more power to regulate the OTC fx market.

The series 3 allows you to do a number of things in the commodity and futures market. There is no sponsorship needed for the series 3 unlike the series 7. I wouldn't be surprised if this changes in the future. The test covers market knowledge for futures and options on futures. The test also covers the basic regulations for futures and options on futures. This is the reason why FDM's have to take it since they have to abide by the same (similar) regulations as FCM's. Anyone that solicits US clients on behalf of an FDM must be a registered AP of the FDM.

I do have to say, if you dont already know this information and much more please do not try and manage money. One other thing do not do business with family and friends.

Best of Luck
  • #14
  • Mar 18, 2008 11:29am Mar 18, 2008 11:29am
You could always go through one of the larger signal services such as collective2 or fx-auto. You will have to give up some of your profits but it will be a lot easier then dealing with the legal mess.
  • #15
  • Mar 18, 2008 12:38pm Mar 18, 2008 12:38pm
Frank,

It would actually be harder to go through FX-Auto or Collective 2. First of all those companies are not going to look at you until you have some sort of track record or unless you are going to bring some clients that are going to deposit a lot of money. But why would you do that if you were going to have to share revenue with them? Like I stated earlier there are no legal requirements to become a money manager in the spot fx market. FX-Auto, I know is in the process of becoming registered as an IB and a CTA. Collective 2 I am not sure about. A lot of FDM's will not be doing business with these type of firms in the future. If they become registered entities they can not pay out non registered entities. I know a lot of FDM's wont accept collective 2 for this very reason. Reason being Collective 2 shares rebates they get with their money managers, this is becoming a big problem for registered FDM's as they get fined for unregistered firms that dont represent themselves properly. The only reason money managers use FX-Auto or Collective 2 is because they have a track record and want more clients. I have a hard time seeing either company accept newbies.
  • #16
  • Edited Mar 19, 2008 9:49am Mar 18, 2008 4:00pm | Edited Mar 19, 2008 9:49am
Quoting fxtrader42
There are a lot of things you should do before managing money. However, if you had a client or two who want you to trade their funds today you could get it done today. FCM's or FDM's have their own qualifications you have to meet in order to manage money. However, if you dont have a website they will most likely set you up immediately. They will ask you to fill out a few pages that they keep for their records so they have some basic information about the money manager. Most of all they want to know how you solicit your clients and what you tell them (like if you guarantee profits...thats a no no.) They will ask you for a valid ID as well. Once they have everything on file and their compliance department approves it which they will unless you give them some reason not too. Then your clients complete the FCM's or FDM"s account opening agreement docs. You and the client will both have to come to terms (profit sharing, management fee, commissions) and then you both sign the LPOA (limited power of attorney.) The account is then opened and the client can fund the account. The money manager will have the ability to group all of his clients together and trade all of the accounts from one platform (formally known as an M-Account.) It truly is that simple.

The NFA as of right now has no regulation over the spot OTC fx market. They do have some control over the FCM's or FDM's (Forex Dealer Member) and they way they conduct business. As of right now if you want to be an IB or act as a CTA (manage money) you do not need to be registered with the NFA. Coming soon to a forex broker near you; all IB's and CTA's will be required to be registered as such for the forex market. Once the farm bill is approved this market could change very drastically as the CFTC and the NFA will be given more power to regulate the OTC fx market.

The series 3 allows you to do a number of things in the commodity and futures market. There is no sponsorship needed for the series 3 unlike the series 7. I wouldn't be surprised if this changes in the future. The test covers market knowledge for futures and options on futures. The test also covers the basic regulations for futures and options on futures. This is the reason why FDM's have to take it since they have to abide by the same (similar) regulations as FCM's. Anyone that solicits US clients on behalf of an FDM must be a registered AP of the FDM.

I do have to say, if you dont already know this information and much more please do not try and manage money. One other thing do not do business with family and friends.

Best of Luck
Thanks Frank. I did know all of what you just mentioned except for the fact that they will set up a website for you. We have been teaching free forex courses for about 1 1/2 years. We have been approached by multiple folks to trade for them. Being the victim of several ponzi schemes, We knew what not to do from the beginning. So once we found out about becoming IB's and managing accounts, we figured that would be the way to go without any money changing hands. Since we have been serving the public for free why not make a continue to help and receive some profit for our time. I'm really not concerned with clients gathered through internet traffic or website publicity. We have enough clients in the area to suffice.
  • #17
  • Mar 19, 2008 8:50am Mar 19, 2008 8:50am
You do not need any kind of track record or need to prove anything to run a service through collective2. You just have to pay them and share your profits with them

http://www.collective2.com/cgi-perl/...rt.sessionhtml
  • #18
  • Apr 9, 2008 4:18pm Apr 9, 2008 4:18pm
Quoting FrankTheTank
You do not need any kind of track record or need to prove anything to run a service through collective2. You just have to pay them and share your profits with them

http://www.collective2.com/cgi-perl/...rt.sessionhtml
You say that as though that's a bad thing. I run a service through them, and while I hate having to give 30% of my profit to them, there's also something to be said about Matt doing all the work for me -- the billing, the chargebacks, etc, etc...

However... the natural progression (for me anyways) is offering managed services (which I do now)...

The benefits are that I don't have to enter trades on collective AND enter on my management platform... I also can take my fees directly from my client's accounts, which means I don't have to worry about chargebacks...

That's the big advantage for a money manager to manage rather than going the signal route...

But I also do both -- I offer signals for people who don't want to be managed, and I offer that managed service offering as well -- for people who don't care about trading...

Matt (Collective2) does provide a good service. 30% is a bit steep... 20% would be better for what you are getting...
Mr. Trend
  • #19
  • Apr 14, 2008 2:24pm Apr 14, 2008 2:24pm
Quoting DollaBill
Here is a link to previous threads on this discussion.
http://www.forexfactory.com/showthread.php?t=44868

A series 3 license is a commodities and equity license. Pretty much it has nothing to do with FOREX. But it covers the handling of money. It is not necessary, but helps in the legitimacy of your business. Just do a google search and you'll get a couple of websites that have info on it.

For the most part all you need to get started is a proven strategy, LPOA (limited power of attorney) between you and clients, A broker who will set you up to manage accounts without a series 3, and some willing clients.

There's some minor intricacies that I left out, but you'll find those in the thread that I posted.

Series 3 is also used for Forex. But you can't say that you will never lose clients fund in a contract. Term guarentee is tossed around in the other businesses, just not this one
  • #20
  • Apr 14, 2008 3:05pm Apr 14, 2008 3:05pm
Quoting mike999
Series 3 is also used for Forex. But you can't say that you will never lose clients fund in a contract. Term guarentee is tossed around in the other businesses, just not this one
Exactly. I'm working on getting my Series 3 soon, and my research has really indicated that yes, you don't need one as a Forex-only money manager, but you really should get it because it will

a) increase the legitimacy of your business and...
b) the industry (CFTC, FINRA, etc..) is gonna require it at some point...

...which means the price you have to pay for getting one now (~$100 + study costs) will probably go up...
Mr. Trend
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