IBRK friends & family structure. Clients have their own separate accounts, linked to the advisor account.
Most meet the “accredited” definition, way over $1M net worth. This is a side investment in my “fund”, which is global macro med/high risk, a specific thing. They all get that I am just doing what I do, they are just piggy-backing on my trades, getting exactly what I get. I think there’s next to zero legal/compliance garbage with this structure, heck I don’t even need a “series bla bla whatever” exam. I’m not marketing to the general public, it’s just a pool of badass insiders I know.
I just get a handshake “capital commitment” and they open the account. I “call capital” when I am ready to buy for everyone and they fund their account, but they can do cashflows out if they like at some point, zero chance of lock up. They can not trade, as that is assigned to me. They do taxes just like any other investment, reports downloaded from IBKR. Next to zero trading fees since IBKR is already almost nothing, split among grouped accounts. Zero market data fees, my advisor account takes care of that. Tons of leverage available, with very low margin financing. The mgmt fees, x% of AUM, x% profits, high-water mark, all calculated by the IBKR system and deducted daily/quarterly/whatever you select. You can also refund fees if you like to the client account (have a bad year, underperform at 12/31, refund 1% fee back to their accounts, very easy.
I’ve been testing their system for a couple years now, it’s totally fantastic, this part is all worked out.
^He doesn’t have a clue what he is talking about, as usual. I don’t know why “we” continue to engage. Definitely a drag on this forum. Friends and family structure at IB does not allow professional management. It literally just gives power of attorney so you can manage a friend’s or family member’s account for free. No fees can be charged or deducted. That would be illegal unless said person complies with the laws of the governing jurisdiction. IB offers excellent professional platforms, in which case you have to provide evidence of being registered with the proper authorities. State or SEC in America.
The thing would be barely enough to justify my time. Add 10 of my contacts who want to start @ $300K = $3M x 1% = 30K/yr. I’m already doing the trades anyhow, just scale it up a bit since people always ask me about this. From there each time someone exits replace them with someone with higher capital. Zero interest in massive clients, just some low-drama contacts.
The only payments to IBKR are for global data (around $100/month for me), and trades (very low). They include all the other stuff for free. Not an IBKR salesrep, but these guys are great!
Here comes Mr. Poopy pants.
Obviously fees can be, and are charged, by the zillion advisors and small hedge funds using IBKR. And anyone who uses the word “professional” is a poser.
LOL, you make everything sound so “official”. All you do is pay a $100 fee, maybe a series-whatever exam, and click upgrade to registered advisor. If you’re not over $25M 15 members, you don’t need to do that, and yes you can charge them fees either way.
If you collect fees, you are not exempt from registration in the U.S. There are exceptions, mostly if investment services are incidental to the primary business. Acting as a portfolio manager is definitely not incidental. No matter how few clients or low of aum, you will have to register with a state or possibly the sec if you charge a fee, i.e. do it professionally . I can’t talk first hand about other countries, but my understanding is most major ones are similar. My guess is there are some banana republics that don’t have stringent financial regulation. But hey, go ahead and open your advisor account and let everyone know how it goes.
Only Advisors who are exempt from registration are eligible to open a Friends & Family account. Generally, most jurisdictions require that an advisor have 15 or fewer clients in order to qualify for exemption from registration. However, registration requirements can vary among jurisdictions. For example, advisors residing in the U.S. may be required to register under either State or Federal law if they meet certain criteria (e.g., total assets under management, number of clients, whether they receive compensation, etc.).
Must be 21 or older to open a margin account, 18 or older to open a cash account.
Accounts are accepted from citizens or residents of all countries except citizens or residents of those countries that are prohibited by the US Office of Foreign Assets Control. Click here for a list of available countries.
A UGMA/UTMA account is intended for a custodian of a minor who is a US resident, and is available as a Cash account only. Minimum deposit is 3000 USD or non-USD equivalent and the monthly activity fee for age 25 or younger applies. A UGMA/UTMA account is a single account with a default single user (the custodian), and up to five Power of Attorney users can be added. The minor for whom the account is opened must be a US legal resident and a US citizen.
For information on SIPC coverage on your account, visitwww.sipc.org or call SIPC at 1 (202) 371-8300.
^You’re simply a buffoon. That is one condition. There are many others that need to be met to be exempt in the US. Take it you wouldn’t do too well on the GMAT verbal or the ethics section of a CFA exam…
From what you’ve shared, you are not exempt and will have to provide evidence of registration. Like I said, go ahead and try. Share what happens. My charity work is done here.
Thank you grand wizard of inflated knowledge. But there are no requirements, anyone off the street can management money, takes a Sunday bam I’m a “registered investment advisor”. Why are you Americans always going crazy making a big deal out of nothing?
After like 4hrs of wasted time reading thru American legal nonsense it seems clear. To future generations who may search this thread and want useful info instead of reading Dwarf Ghilbi posting useless information…
Old Fed Rules : Section 203(b) of the Advisers Act 1940 gave exemptions to advisor with fewer than 15 clients. This “private advisor exemption” thereby made them immune to Section 205(a)(1) of the Advisers Act that prohibited an investment advisers from charging performance fees (because they were NOT “investment advisers” under the law). However that is now destroyed by Dodd Frank…
New Fed Rules : The above old exemption rules are crushed, and replaced by three more narrow rules (venture capital, private funds, and foreign private investors). Really no normal investment advisor qualifies for those. And, since small advisors can’t register at the federal level anyhow, it goes to the state level…
State : mine requires registration unless you meet some narrow exemption, which I do not. Now, because I must register, state rules do not allow performance fees except for “qualified clients”. Well, this of course introduces complication. Now instead of setting your mgmt fees in a clear understandable way and getting on with business…you need to review each person, ask uncomfortable specific questions about their net worth to see who qualifies, and you end up with two sets of fees (for qualified investors 0.5% AUM + 5% performance, and non qualified investors 1.0% AUM). That’s complicated and annoying to everyone, and so advisors will just do flat 1% AUM, and proceed to underperform…which brings us right back to why the industry is like this, and why I have always avoided this business.
Summary – even though I want no association with the USA, and spend not much time there, I have been fuc@#%d by Dodd Frank, like everyone else. Well, that’s just dandy…so I pay a quick $100 and bam I’m a “registered advisor” no biggie, the annoyance is not letting pools of private capital pay their advisor in whatever way they agree upon.
