Managing other people's money

Young Blood

Im a private trader who trades the forex market. A friend approached me and asked me to manage some of his money online and I agreed. I'm just wondering, if I am approached by a third person, is there a point I must declare that I am running a commercial enterprise?

Nody

I'd say you'll need to check with your broker because I could easily see anti money laundry laws coming into play here along with the difference in account status.

Atlantic Dawn

You would want to be really careful as if they lose money they could come back and sue you. Money laundering and operating without a licence would be other issues.

Young Blood

I'm guessin one way around it would be to have them set their own account up and give me a power of attorney over it.

bren2002

If your not high frequency trading can you not just tell them what to do?

Young Blood

bren2002 wrote: »

If your not high frequency trading can you not just tell them what to do?

No because they're not internet savvy and plus I think I can make a profit for myself.

bren2002

Really? Make a profit off them. Personally I can see plenty of opportunity for this to go pear shaped. Would you not just walk away and not risk the relationship.

Nody

Young Blood wrote: »

No because they're not internet savvy and plus I think I can make a profit for myself.

Either you can make a consistent and significant profit on your own money (against the millions of professional traders with supercomputer, algorithm support and knowledge) and there's no reason to gamble their money; or you can't so why do you think gambling someone else money is going to be a good idea?

The simple fact is the great majority of amateur brokers fail to make a profit long term (but continue because they had one or two years of success so "they only need to turn things around"). If you are only in it to make a profit short term for yourself while losing money long term due to lack of internet savy for your friend then I'd simply direct the user to index funds instead.

Graham

Don't even think about doing this until you have taken proper legal advice.

From your opening post it sounds like you are giving financial advice, managing a clients money, and investing money on a clients behalf (or at least you're thinking about it).

Here's a couple of FAQ entry from the Central Bank Website that might wake you up.

What do I do if I have engaged with an Unauthorised Firm?

If you deal with any unauthorised financial services firm or person you risk losing your money. Before dealing with any firm or person offering financial services, check if that firm or person is authorised to provide the financial services they are offering.

What if I have already dealt with an unauthorised investment firm?

If you invest with an unauthorised investment firm, your funds may be at risk, and you will not have access to compensation under the Investor Compensation Scheme or the services of the Financial Services Ombudsman. You should immediately contact the Central Bank and the Gardaí.

Here's a list of the types of financial businesses that require a license/approval/authorisation:

• Approved Professional Bodies
• Brokers / Retail Intermediaries
• Bureaux de Change
• Credit Institutions
• Credit Servicing Firms
• Credit Unions
• Debt Management Firms
• Electronic Money Institutions
• Funds
• Fund Service Providers
• Insurance/Reinsurance Undertakings
• Investment Firms
• Moneylenders
• Money Transmission Businesses
• Payment Institutions
• Regulated Markets
• Retail Credit Firms/Home Reversion Firms

http://www.centralbank.ie/regulation/industry-sectors/Pages/default.aspx

Atlantic Dawn

Why not just give them a steer as what you think might be worth investing in and tell them how to do it but beyond that leave the actual transaction and setup 100% in their own hands?

Young Blood

I think it might be best that way.

Graham

Atlantic Dawn wrote: »

Why not just give them a steer as what you think might be worth investing in and tell them how to do it but beyond that leave the actual transaction and setup 100% in their own hands?

Young Blood wrote: »

I think it might be best that way.

like a financial adviser?

http://www.consumerhelp.ie/choosing-a-financial-advisor

I'd just leave it alone if I were you. If things go pear shaped for your friend you leave yourself open to all sorts.

For ever odd

On a slightly different angle, would it be possible for one to manage a fund for one's children?

Something along the line of 30% government bonds (keep track of inflation) , 30% blue chip (re-invest dividends), 25% growth stocks (medium risk), and 15% cash. 20 years plus would be the time horizon.

All in their names.