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Cyrus
Rookie Joined: Oct/22/2014 Location: United States Status: Offline Points: 80 |
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Posted: Oct/22/2014 at 5:17pm |
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Hello everyone,
I'm the portfolio manager of a small independent RIA that operates a value investing equity strategy in replicated separately managed accounts.
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MichaelBurton
Senior Member Joined: Jun/02/2014 Location: Austin, Texas Status: Offline Points: 1089 |
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Welcome. You'll gain a lot here. How'd you get into the business?
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Cyrus
Rookie Joined: Oct/22/2014 Location: United States Status: Offline Points: 80 |
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Originally, I was in science. I majored in biomedical engineering in college and went into medical research. My first job was in developing nanoparticle drug delivery vehicles for cancer therapies. Later, I got approached by a venture capital partner that was an old friend of one of my brothers. He was getting together scientists for a new company they had funded that did DNA sequencing. I went to work for that company and the VCs took me on company visits to help them do due diligence on other potential investments (They often used scientists from their portfolio companies for this purpose) which was my first introduction into analyzing businesses. I realized that the company was not going to make it, so I went into a PhD program to continue my scientific career.
In grad school, I really missed the business world, loved investing, hated teaching undergrads, and couldn't see a future in academia for myself. So I left there with a master's and got started on the investment management path. I came to the conclusion that value investing was the best way to manage money, so I went to work for almost a year at a new mutual fund that was started by the son of a famous value investor. The arrangement was that they would teach me how to manage money in a professional value investing fund, and I'd work for free. I learned how they analyzed companies and then figured out a way to improve on their process using quantitative screening and data analysis techniques. So I then started my own investment composite using family money at the beginning of 2014. My strategy uses algorithms to find companies that appear to be good investments based on ratio analysis of the balance sheet, cash flow statement, as well as insider buying behavior. Then, from this short list I analyze the businesses using classic value investing methods. I'm not sure how to market my firm. I'm also not sure if I should target financial planners to work as a subadvisor or go after affluent clients directly. It seems like this forum is a great place to get ideas for that. |
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Moraen
Admin Group Resident Sage Joined: Mar/09/2010 Status: Offline Points: 30786 |
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Cyrus, welcome.
Interesting approach. I like your method for paring down your selections. I would say the best way to market your firm is directly to planners who want nothing to do with investing. |
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I come in peace. I didn’t bring artillery. But I’m pleading with you, with tears in my eyes: If you fuck with me, I’ll kill you all. - General James Mattis
Fiduciary as Fuck - iMo |
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Macduff
Senior Member Joined: Oct/27/2013 Location: United States Status: Offline Points: 1140 |
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You should talk to this guy Apac; I've heard he learned value investing from Buffett himself and he'll be looking for a new job soon as well. Better scoop him up!
On a serious note, welcome to the board and I look forward to your contributions.
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“I was born for the storm, and a calm does not suit me.”
― Andrew Jackson |
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luvindy
Moderator Joined: May/17/2010 Status: Offline Points: 25771 |
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8/31/12,Sportsfreak:
"If Barak wins this election, or appears to be clearly winning, we are all fucked. Market will tank big time." Dow 13,090 S&P 1406 5/23/13 UC:Dow 20k before 20% crrectn Dow 15, |
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Jagger
Senior Member Ukranian Mobster Extraordinaire Joined: Aug/28/2012 Status: Offline Points: 1098 |
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Welcome to the board!
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wiredup
Platinum Member Joined: Mar/11/2010 Status: Offline Points: 22776 |
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How could someone so smart want to get into this business? I seriously want to tell you to go fuck yourself, go back into science and help cure cancer, or some other horrible disease like ED or anything to do with kids where you can actually make a difference. Not saying we don't make a difference in people's lives, just that you have a background that could actually make a difference between life and death, not just running out of IRA money. Unless you are Apac's alter ego, and then you'll be back to whatever you did before this by tax season. |
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wiredup
Platinum Member Joined: Mar/11/2010 Status: Offline Points: 22776 |
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This might be my new pickup line just to see the look on her face afterwards. |
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Cyrus
Rookie Joined: Oct/22/2014 Location: United States Status: Offline Points: 80 |
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Working in science sucks as a career. There's little pay, horrendous working hours that make having a family or hobbies outside of work difficult, and no job security. For chemists, real wages have been in secular decline for 20 years. Federal funding is being reduced. I know one biologist who lost his job and is literally homeless in California right now. Even top scientists like Nikola Tesla ended their lives in bankruptcy. Douglas Prasher, the inventor of synthetic fluorescent proteins, lost all of his research funding and had to drive a delivery truck for 20 years. The only reason to be in scientific research is if it's the only thing you could imagine wanting to do with your life. If there's anything else at all that you could devote your life towards, that's probably a better bet. Personally, I have no desire to be a martyr and I find investment research to be very interesting.
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rooboy1010
Member Joined: Dec/03/2013 Location: Southeast Status: Offline Points: 168 |
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How are you structured to act as an SMA manager? Did you work with an attorney or consultant that help you set up your firm in a way other SMA managers are set up?
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Chief
Gold Member Joined: Mar/12/2010 Status: Offline Points: 16265 |
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Gotta ask...who?
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"You like winning don't you?" "Saves you from having to say the word please."
Good point Chief. Iceco1d 10/30/12 |
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Cyrus
Rookie Joined: Oct/22/2014 Location: United States Status: Offline Points: 80 |
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For the ADV and client contracts, I just looked at what other firms had written and made a composite of those. It took me about 2 weeks to write it out. I then asked a guy in law school studying securities industry compliance law to give it a quick double check. For the contract I would have with advisors who are investing their client's money in my strategy, I'm still working on that one.
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RipRock
Senior Member Joined: Oct/29/2013 Status: Offline Points: 1807 |
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Not going to happen. That is considered "selling away" if you don't have a selling agreement with the BDs. You are better going the advisor route and raising funds like that until you have enough to turn into a mutual fund or SMA.
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Cyrus
Rookie Joined: Oct/22/2014 Location: United States Status: Offline Points: 80 |
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1) I have a custodian for my account, let's call it Broker A. On their system, I am both an advisor (for retail clients) and a money manager (SMA for advisors).
2) The advisor that I hypothetically make a deal with sets up an advisor account at Broker A. 3) They then invite clients to open accounts under their advisor managing account. 4) They then invest their client's money directly into stocks, bonds, etfs, or by allocating to an SMA. 5) Hopefully, they allocate a lot of the money to my strategy, and I make an agreement with both the advisor that I won't try to take their client over to my advisory side and with the client saying what % of AUM I'm charging. So, I've already finished part 1 and have the agreement with the Broker. Now, I just need to write good contracts for the subadvisory relationship. The advisors aren't going to allocate their money to my strategy unless they're comfortable that I'm not trying to compete with them. I don't think this arrangement qualifies as selling away since it's all done under one BD
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RipRock
Senior Member Joined: Oct/29/2013 Status: Offline Points: 1807 |
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Shouldn't you have that already completed this framework before you opened up shop? If you opened up your shop at Custodian/BD A, and I am an advisor at indy/wire BD B I don't think I can send you funds without a relationship between BDs (unless you have a selling agreement with my BD I cannot ACH/Wire/Send a check to your Custodian/BD A, from my Custodian/BD B). I work as an SMA in many cases, and send the registered advisor a trail from my billing. These advisors are set as an RIA, but they manage no money. I cannot accept funds from other BDs (and pay the advisor a trail) because I don't have a selling agreement with the BDs. If my buddy at ML wanted me to run $100k of his clients $2mm he cannot set up an account at my BD under his firm name. The client would have to directly ACAT the funds over to me free and clear (I could not pay him in this way). Edited by RipRock - Oct/23/2014 at 6:17pm |
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Cyrus
Rookie Joined: Oct/22/2014 Location: United States Status: Offline Points: 80 |
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In my set-up, I'm not paying any trails. Both the RIA and the client need to have accounts at my broker. If they're not there already, then they need to make accounts before I can accept their money. The client pays 2 fees, the advisory fee to the RIA and the SMA fee to me. Both are a % of AUM. To mitigate the RIA's fear that the client just fires the RIA and invests with me directly in order to avoid paying the advisory fee, I would need to have a contract with them which reassures the RIA that I won't let the client do this.
One of the major downsides of my setup is that it pretty much limits me to using independent RIAs since I don't have any agreements with the big wirehouses (Ameriprise, EDJ, etc).
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Wet_Blanket
Admin Group Team America (not iMo) Joined: Mar/10/2010 Location: New England Status: Offline Points: 43649 |
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This way you can just run the money and not have all the other paperwork headaches. You won't have a direct contract with the client as well, which would make Advisers more likely to use you. SELLING AWAY - and this isn't considered selling away. RIAs are allowed to hire on other SMA managers. If he were going after registered reps, then he would need to put in place a sub-advisory agreement with the corporate RIA and get on their wrap platform.
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The true 🤡 was the Biden voter all along.
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Wet_Blanket
Admin Group Team America (not iMo) Joined: Mar/10/2010 Location: New England Status: Offline Points: 43649 |
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The true 🤡 was the Biden voter all along.
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RipRock
Senior Member Joined: Oct/29/2013 Status: Offline Points: 1807 |
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Wet, if he wasn't on the registered reps platform and didn't have a sub agreement with the wire RIA and collected funds from an another advisor wouldn't that be "Selling Away".
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