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A few friends want me to manage a part of their money in exchange for a small custody fee. How can this be done legally?

scooterguy

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Mar 15, 2023
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I have some friends who know very little about investing and have very little discipline, so they'd rather have me invest that money in a few ETFs and take care of portfolio rebalancing, instead of doing it themselves and running the risk of going into panic selling mode or DOGE greed.

The starting amounts wouldn't be large, we're talking about 3-4 friends with starting amounts ranging from $15k to $30k each. In other words, I'd be initially managing around $100k.

Is there a way to do this legally somehow? I wouldn't really be making much from managing their money, but I can see this having interesting long-term benefits as those amounts grow over the next few decades and as more people invest; it can lead to a small wealth management firm.

There is very little information around, though I know that starting a wealth management firm has huge upfront costs. Maybe there is some way to do this at a small scale? Maybe starting the company in a specific country or state?
 
Thanks for your suggestion. I forgot to mention that they all live in different countries, so I guess that makes it even more complex.
Better have them opening their own brokerage account and give you access, then you taking on their cash.
It is also way to little to make it worth, setting up a company and giving them shares for their cash.
 
The amounts are too small for anything serious like an investment fund.

For very small private investment projects like this, I've seen people use partnerships (LP, LLP, or even GP) in creative ways. For example, you could look into forming a partnership and structure the partnership agreement in such a way that the investors are limited partners and you are general partner or unlimited partner. It depends on local laws and you'd need a lawyer to help you draft documents in a way that it isn't a public facing investment company or some other form of regulated activity.
 
I have some friends who know very little about investing and have very little discipline, so they'd rather have me invest that money in a few ETFs and take care of portfolio rebalancing, instead of doing it themselves and running the risk of going into panic selling mode or DOGE greed.

The starting amounts wouldn't be large, we're talking about 3-4 friends with starting amounts ranging from $15k to $30k each. In other words, I'd be initially managing around $100k.

Is there a way to do this legally somehow? I wouldn't really be making much from managing their money, but I can see this having interesting long-term benefits as those amounts grow over the next few decades and as more people invest; it can lead to a small wealth management firm.

There is very little information around, though I know that starting a wealth management firm has huge upfront costs. Maybe there is some way to do this at a small scale? Maybe starting the company in a specific country or state?
Unless you are licensed, tell them to f**k off.

If they are American and you are American, tell them to f**k off loudly.
 
Forming a company could be difficult as then they might see you as a professional broker and ask you for license.
It only makes sense if they live in 3rd world countries where they won't have access to proper brokers etc.

The easiest option would be that you let them open accounts on Interactive Brokers (using your referral code so you collect $200 of each for the start LOL).

Then they deposit money and add you as an user:

This way you could login into their accounts and make trades on their behalf.
And that's exactly what you'll be doing for them - managing their money.

In the end each one of them would have to do the reporting and pay the taxes etc according to the country they live in.
And they would be able to check their investments at any time.