Managing other people's money and Series 7

[doji]

Hello everybody,

Is a Series 7 needed in order to trade other people's money either through managed accounts or a hedge fund kind of setup?

thanks in advance

[Iacotel]

Hi doji,

I think you only need a Series 7 if you intend to become a broker (dealing with customers), or a proprietary trader trading firm's funds. I may not be right 100% on this. Other more knowledgeable traders please help on this.

[Alchemist]

Hello doji,

if you have discretion in managing clients funds, chances are you will have to get registered as an investment advisor at some point. To do that you would need to first get your Series 7 at least. assuming we are talking about the US, and depending on the state where you operate, you may also have to get other licenses like the S65.

you may want to ask yourself whether a hedge fund kind of setup is what you really need/want. there may be other less onerous ways to achieve the same goal.

[doji]

thanks everybody for your responses.

I figured starting a money management business was no joke. What are the other options you are talking about exactly? Thanks

[Alchemist]

Hello doji,

well, you might want to do some some digging to find out whether an investment club kind of setup would better suit your needs and simplify things a bit, for example.

Investment clubs are by definition "A group of people who pool their money to make investments. Usually, investment clubs are organized as partnerships and after the members study different investments, the group decides to buy or sell based on a majority vote of the members. Club meetings may be educational and each member may actively participate in investment decisions."

if you go the investment club route, you will not be entitled to any compensation for your "picks". However, it might be a good opportunity to get your feet wet and test whether managing other people's money if right for you without going through the high overhead of starting a "regular" money management business.....something to ponder on......

[doji]

thanks alchemist.

I understand investment clubs cannot compensate for stock recommendations. That might be a problem. Still, I agree. It's definitely a better alternative than just starting out from scratch with a regular money management business.

Do you know of any other arrangement or business form that might allow compensation? thanks

[Alchemist]

hmmm…you might draft a private agreement between you and your "clients". However, that might get you in trouble in case things don't work out well with your performance. Keep in mind that whenever you have discretion in managing clients' funds, some form of regulation will step in.

[doji]

thanks for all your help, alchemist. I'm researching several different (and cheaper) alternatives to accomplish my money management business goals.

[TapeReader]

whatever you decide to do, always remember to speak with a pro on the matter. Should things go bad, consequences can be disastrous when dealing with someone else's money.

[breakout]

managing other people's money is no joke. Are you an accomplished trader/investor yourself, yet? Not trying to sound like a wise guy, but you should only consider managing other people's money if you have already performed well trading YOUR money. Just a thought....