Managed Accounts - How Do They Work? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Which is the safest broker in relation to the bank they keep they're accounts with 16 replies

Managed FX Accounts 5 replies

Managed Accounts 7 replies

FXCM managed accounts - Too good to be true? 5 replies

managed accounts 4 replies

Attachments: Managed Accounts - How Do They Work?
Exit Attachments

Managed Accounts - How Do They Work?

  • #1
  • First Post: Dec 20, 2009 2:54pm Dec 20, 2009 2:54pm
  •  MarkH
  • | Joined Oct 2009 | Status: "Show Me The Money" - Jerry McGuire | 222 Posts
Hello everyone,

I have a trading system that works very well and have contemplated starting a Managed Accounts business. An executive friend of mine is encouraging me to pursue the idea and to learn more about it. I am highly experienced in matters of business, having owned and operated businesses. Even have invented a product that has gone global in sales.

I realize running a conventional business is vastly different than starting a Managed Accounts business, here are my questions if anyone has knowledge of this and can help answer them;

(a) To run Managed Accounts, is licensing required by any Federal or state agencies?

(b) What is the typical fee charged for a Managed Account?

(c) I have heard of companies asking clients to open their own account and then signing a Limited Power of Attorney over to the Manager to allow the Manager to access the account and allow trading to begin. Has anyone heard of this?

Those are the first few questions and if anyone wants to add thoughts or comments that I have missed, please feel free.

Thanks in advance,

Mark
  • #2
  • Dec 20, 2009 3:19pm Dec 20, 2009 3:19pm
Hi Mark,

Quoting MarkH
(a) To run Managed Accounts, is licensing required by any Federal or state agencies?
Mark
If you live in the U.S. and you have more than 15 clients or $250,000.00 under management, you must register with the NFA and CFTC as a CTA, or if you plan to solicit clients (meaning you aren't simply trading a friend or relative's account) you must also register.

To register you will need to pass the Series 3 exam and possible the Series 34. Then you will have to pay the dues/fees to register (around $1,000), and then have a lawyer draft your disclosure documents and other necessary paperwork.

There are more steps of course, but these are some of the biggest.


Quoting MarkH
(b) What is the typical fee charged for a Managed Account?
Mark
Most CTA's charge a 2% management fee and a 20% performance fee.

Quoting MarkH
(c) I have heard of companies asking clients to open their own account and then signing a Limited Power of Attorney over to the Manager to allow the Manager to access the account and allow trading to begin. Has anyone heard of this?
Mark
If you are managing accounts and not operating a Pool, the client will open his/her own account and sign a LPA so that you can direct the trading activity. The LPA is available through the FCM.

Hope this helps.
Happy trading,
Art
Visit my journal here.
  • #3
  • Edited Dec 21, 2009 1:33am Dec 20, 2009 3:56pm | Edited Dec 21, 2009 1:33am
Quoting MarkH
Hello everyone,
(c) I have heard of companies asking clients to open their own account and then signing a Limited Power of Attorney over to the Manager to allow the Manager to access the account and allow trading to begin. Has anyone heard of this?
Mark
Hi. Yes, it is a well known process. The ideea is that the manager only have power to make operations in the market(trade) and he can't withdraw money of the client(investor). So, from the investor perspective it is a very good solution, because his manager can't "run" with his funds. Also, ussualy the broker make all the operation when it comes with the fees.. you know, when the manager need to take his part of profits, this is when the broker do the job. I know that Oanda do this(I also use them).
  • #4
  • Dec 21, 2009 3:20am Dec 21, 2009 3:20am
Depending on how you see your future, this PDF will help with some guidelines from the CME.

Let us know how things are going.

----------
Attached File(s)
File Type: pdf How-to-become-a-CTA.pdf   423 KB | 1,537 downloads
  • #5
  • Dec 21, 2009 4:01am Dec 21, 2009 4:01am
When looking at the option of using a managed account I found that it can be made difficult for a client to close their account. This is done by simply always having an open position. I did find one that closes all positions every day so that the correct value can be determined and closure requests honored. That would be an important consideration to me in any decision to grant a LPOA. I'm not sure if a pool method would allow for the fair value to be determined on a daily basis since there would be cash reserves in any decently managed pool.
  • #6
  • Dec 21, 2009 10:02am Dec 21, 2009 10:02am
Quoting gat
When looking at the option of using a managed account I found that it can be made difficult for a client to close their account. This is done by simply always having an open position....
It depeneds on what broker is used. For instance, at Oanda, the client can contact oanda and tell them that his manager don't want to de'allocate his funds and Oanda will force the manager to do all the stuffs so the client will get his money back.
  • #7
  • Dec 21, 2009 10:17pm Dec 21, 2009 10:17pm
hmmm..... like what Rosscub mentioned, if you are residing in US and you have more than 15 clients or $250,000.00 under management, you must register with the NFA and CFTC as a CTA, or if you plan to solicit clients (meaning you aren't simply trading a friend or relative's account) you must also register.

But what if you do not have more than 15 clients? do you still need to register with NFA and CFTC?

Correct me if i am wrong, in terms of managed account, the company actually takes over the account of their clients and trade for them? The company earning would basically through the spread?
  • #8
  • Dec 21, 2009 11:21pm Dec 21, 2009 11:21pm
No the broker earns through the spread.
The greatest force on earth is compound interest.
  • #9
  • Dec 22, 2009 9:28am Dec 22, 2009 9:28am
Quoting KPForex
But what if you do not have more than 15 clients? do you still need to register with NFA and CFTC?
If you are holding your self out to be a CTA (if you plan to solicit for clients), you must be registered. If you just want to trade for friend or family member you can act as an exempt CTA, but if you ever have more than 15 clients or $250,000 under management, you will have to register.

Quoting KPForex
Correct me if i am wrong, in terms of managed account, the company actually takes over the account of their clients and trade for them? The company earning would basically through the spread?
The person managing the accounts usually charges a management and performance fee.

Art
Visit my journal here.
  • #10
  • Dec 23, 2009 11:16pm Dec 23, 2009 11:16pm
Quoting Rosscub
If you are holding your self out to be a CTA (if you plan to solicit for clients), you must be registered. If you just want to trade for friend or family member you can act as an exempt CTA, but if you ever have more than 15 clients or $250,000 under management, you will have to register.



The person managing the accounts usually charges a management and performance fee.

Art
oh i see... so is regardless whether i am residing in or outside US? let say i am residing outside US and i want to register a business in New York, US. May i know how do i go about it?
  • #11
  • Mar 10, 2011 1:14pm Mar 10, 2011 1:14pm
Thinkorswim lets account holders to sign a Limited Trading Agreement (LTA) that gives another individual the ability to make trades on the account holder's behalf, but doesn't give access to remove funds. The account is entirely in the account holder's name, and he or she can close it at any time.
  • #12
  • Mar 12, 2011 6:49am Mar 12, 2011 6:49am
With managed accounts the investor's money is managed by the forex manager and the manager trades of behalf of the investors and pays profit to the investors. Investors do not have to trade. Investors have complete control/authority over the money deposited with forex manager. Managed accounts means specialisation.
  • #13
  • Jul 5, 2011 2:03am Jul 5, 2011 2:03am
What are the typical FX Managed Futures Platform[MFP] differentiators: structure, features and brokerage/charges that can be negotiated with a MFP Broker to the best advantage for an exempt CTA Manager(non-USA resident).What UNIQUE features distinguish MFP's for Managed FX portfolios with the integrated real time risk & performance analytics,particularly for managing multiple retail accounts starting from US$500,- each,initially as an exempt CTA. Some differentiators are, integration compatibility to third party reporting free tools like: fxstat.com, Onanda's pre-agreed profit share payout to the account Manager,etc.
  • #14
  • Jul 5, 2011 3:23am Jul 5, 2011 3:23am
Quoting Rosscub
Hi Mark,



If you live in the U.S. and you have more than 15 clients or $250,000.00 under management, you must register with the NFA and CFTC as a CTA, or if you plan to solicit clients (meaning you aren't simply trading a friend or relative's account) you must also register.

To register you will need to pass the Series 3 exam and possible the Series 34. Then you will have to pay the dues/fees to register (around $1,000), and then have a lawyer draft your disclosure documents and other necessary paperwork.

There are more steps of course, but...

For me personally, this was helpful and interesting for reading.
  • #15
  • Last Post: May 29, 2013 4:54am May 29, 2013 4:54am
I know that about fee.
There often contains commission fee and management fee.
and managed account often use high-watermark.
0 traders viewing now