I’ve been approached by 5 rather wealthy people over the past month to take on capital from them and trade it in line with my account in a managed account fashion.
Thats all well and good but I don’t quite know what I should be charging these people in terms of management fees, profit sharing, etc…
Does anyone manage money in here or have experience paying others to do so? I’ve heard of people charging either high mgmt fees, and 25% profit sharing, and others skipping the mgmt fees all together and just charging upwards of 60% of profits…
I’m leaning towards no fees, and just a straight % based profit factor.
The sharing of the profits will depend on if you are going to trade clients account separately or pool the funds from several clients and trade in one account. If you are going to pool the funds you might want to “promise” a fixed amount(%) but if you are trading each clients account you can do a split of 70-30 upwards.
I do not personally manage any OPM, but I am very close to a trader that does.
This trader only manages family money and charges them 20% of all profits. 70/30 does not sound bad to me for complete strangers.
Just make sure that you never end up managing money for free, even if its your own family because once you get into it you will realize that there are certain “pains” to go along with it regardless of who it is.
I manage quite a few accounts now or should I rather use the term investments. At first: I also started out with the ‘percentage of profits’ thing i.e. the client was guaranteed 10% per month of their initial capital and any profits over and above the 10% were split between myself and the client. Believe me when I tell you that this only led to absolute disaster. If you’re going to do it that way then be prepared to have to detail every single trade that you do to your clients because if you don’t: then they start questioning just how much profit you actually made and are you taking too much!!! And it’s been proved to me that even when a client has had his capital DOUBLED in two or three months on this basis they’re STILL not satisfied!!! So I now operate by guaranteeing the client a FIXED amount at the end of a period and that’s it. Anything I make over and above that amount is mine and there can be no ‘haggling’ about it after the fact. I do pay bonuses if I’ve done well but they are not guaranteed i.e. they are paid at my discretion and are dependant on my performance. Now to be honest: the amounts that the clients get is almost exactly the same as they would have been using the original plan but the difference is in the wording. All I can tell you is be careful out there!!! Don’t think that because you’ve made 100% for a client on his money he is just going to be happy with that. This business makes even the most generous and kind and understanding of people EXTREMELY greedy which then causes them to behave like rabid dogs I promise you!!!
And I’m sorry but I have to disagree that trading other peoples money is disastrous and looking for trouble. It’s only disastrous if you’re not already making your own money. If you are then I see no reason why it’s a problem. All you’re doing is increasing your capital so that YOU can make MORE money by trading bigger lots. If you’re NOT ALREADY making consistent profits then of course not only would it be disastrous but dishonest too in my opinion!!!
Dale - Thanks for the insight!!! Thats great information. I see what you’re saying and honestly I could see that happening where a 100% return on their money each month all of a sudden becomes “not enough”… Ironic when some of these guys have lost 50% in the past 5 months alone…
Certainly a lot to think about. Hearing stories like that are very valid points that I need to take into account. Right now I enjoy trading and being able to trade on my own terms. I just thought managed money was an opportunity for me to spread the wealth around to some other guys who were getting hammered in the markets, but I can see how even the bets relationships could be made to suffer even when you are performing for them.
Actually: after I was confident enough with my Wilder ‘stuff’ I had no intention of managing accounts or trading ‘other peoples money’ i.e. my original idea was to have people open their own trading accounts and I would ‘mentor’ them on Wilder’s ‘stuff’ so that they could learn and make the same profits that I was making. In return: I would get the IB commission from the broker. But then I was approached by a potential client (or investor) who had no interest in trading whatsoever and was only interested in making some money. This is what gave rise to the managed account idea. But like I said: almost from the ‘get go’ I could see where things were going to go ‘pearshaped’. For one thing: I do not keep a log of my trades so I only had an opening balance at the beginning of a month and a closing balance at the end of a month and even although (and believe me I was honest in my profit splitting here) both client accounts were up 37% in the first month there were already ‘hints’ or ‘questions’ as to whether I’d done the calculations correctly and was I indeed being fair in my profit distribution!!! That’s when I changed to my ‘fixed amount at the end of the period guarantee’!!! The other problem that I had at the time was that my brokers daily trading reports were not ‘up to scratch’ and were pretty useless at the time to act as ‘proof’. Also: I only have one trading account i.e. all clients money goes into a single account because it’s just not feasable to trade multiple accounts at once. The brokers do offer ‘managed trading accounts’ i.e. you can have multiple ‘slave’ accounts linked to a single ‘master’ account and every trade you do on the ‘master’ account is replicated on the ‘slave’ (client) accounts but then there is ANOTHER issue: only the CLIENT can withdraw funds not you. The obvious potential problem is that you have absolutely no control over whether or not the client is actually going to pay you your commission for your hard work!!! I know that sounds cynical but believe me: you WILL get taken sooner or later!!!
Anyway: if you’re doing well and making profit consistently then ‘go for it’ is all I can say!!! The fact of the matter is that it allows you to reach your financial goals a lot sooner and you’re paying out to your clients FAR more than they can get ANYWHERE (which ended up being my ‘retort’ on the accounts mentioned above i.e. I ‘in a not so nice way’ said that even IF I was being dishonest and taking more than my fair share of the profits you’ve STILL made well over 100% on your capital in the past few months and if you’re not happy with that then may I suggest that you go and invest your money in a bank where, if you’re lucky, you can get around 10% per ANNUM. That solved a lot of problems)!!!
Do it well and you’ll be on top sooner than you think. If you need any more insight then please let me know. I’m ‘full of it’!!!
We have a family business that does this we do alot more than just forex tho
we do 1% in/out on securities and .5% in/out on full position in XCHANGE we do longer term tho
another way our clients sometimes opt to do it is fee based where you change a percent a year to work their money based on opening amount that pay year.
100,000 at beginning of pay year @ 3% fee for year = 3,0000 you receive/12 months or in lump what you make for them lets say 15% that year theyll have
111,550 you take 3% =3,347 next year and that per client
I was reading the replies and didnt see anything said about a pip rebate…yah 20 - 30% is common, but you also should consider getting a pip rebate from the broker, which can be negotionable. This can be paid monthly. And if your trading frequently and trading large amounts it would be worth it. So if you get a full pip, average rebate, then you would get $10 for every 100k traded. 2 trades per day on a million using 2% margin would net you $8000 for the month before the performance fee.
I don’t get pip rebates but I do get IB commission on a few accounts where the clients trade their own accounts. In those instances that’s all I take / receive i.e. no commissions or profits or anything like that from the clients.
Either way: it does add up as you quite correctly state. I only have a few IB accounts with ‘smallish’ balances (well nowhere NEAR to $1 000 000 I assure you) and I’ve had one or two months where the IB commission was about $1 000 so I’m figuring that on the amounts that you’re talking about you could make a lot more (maybe). The problem, of course, is that it’s not consistent and, because I do not encourage my clients to trade often, my commission of course is less and most months the commission is around $250 or so.
In my opinion if your going to trade for others the only right way to do it is to find a broker that will let you manage a small # of accounts on a managed platform. You can charge a pip spread for each trade that is automatically deposited to your account when you trade. You don’t have to “TRUST” anyone to pay you at the end of the month or week. Not that people are dishonest, but money does strange things to people. i my self am doing this, and it works well. Although I will take my series 3 sometime after the beginning of the year, you are allowed to trade less than 15 accounts and under 250K with some brokers. You just have to call them and ask about the manager accounts. Also all of the trade breakdown is done within the platforms for you and can be set up to email them daily, weekly, and monthly. This helps to minimize margin of human error. Just a thought.
I have never managed fund but I hear its a initial fee and 6% of profits. Or 7% if no fee. 5 people means you have to register with the NFA. And get a special license because spot markets have no series license. And its a fee to you yearly. My advice is resist it. If you do want to go forward take no more than 4 people because you count as one and more than 5 you need to register.
