Becoming a fund manager?

Hi,

I’ve just discovered this website, so this will be my first post. I hope I’ll be forgiven if it’s not on the appropriate board.

Can anybody out there offer some pointers on the following?

What does it take, in terms of qualifications etc, to become licensed to be a fund manager considering my background?

Briefly:

I am 38 years old, have been a company director for 18 years and have a good track record. Unfortunately, having not attended university, I lack academic credentials.

Also, after having an interest in investing since my teen years, I enjoy managing my own stock portfolio (more than running my business!) and over the past 12 years or so have done consistently well.
I now feel confident enough in my investment strategy that I am now at the point where I have decided to sell my business and put the proceeds into a private fund and do something I enjoy.

Some of my friends and family have suggested that I should consider starting an investment management business and are prepared to commit funds.

Before I even consider being responsible for other people’s money I would like some idea if first of all it is possible for someone without a degree and no background in professional money management etc to become licensed.

What steps would I need to take? What red tape is involved? What hoops do I have to jump through?


Thanks for any advice.

Hterm,

I am in Aust and type the following from experience. I believe my comments are relevent to the UK. You can basically do whatever you want as an individual. People can give you their portfolios to manage and you can do it on an employee/ employer basis.

If you want to pool monies i.e group client funds into a single account then you will probably need a license to operate onshore unless you operate in a company structure. However to issue shares and raise capital from the general public you need a prospectus or disclosure document. This can be expensive to produce but I have created over a dozen public companies through a compliant template prospectus that is only 30 pages long. However, the funds are only ever raised because of the people involved not the quality of the disclosure document!.

If you went overseas (say BVI) and set up a company you could then attract investors offshore but this is fraught with inadvertant breaches of local law and can preclude you from accepting money from family, friends and domestic people.

Basically, I say - set up a company (plc or ltd) and whack together a compliant disclosure and then source the funds. Even if you raise GBP1m it is a start and if the returns are good you will eventually receive more money than you can handle.

A good idea is to get an accountant and a lawyer onthe board and give them profit share or similar for their expertise and iput to keep costs low.

Please realise I have extremely limited knowledge of the UK FSA laws so please do not rely on anything above. But as your laws are a derivative of the Antipodean ones I figure you must have picked up a few common threads from us ;-)

Cheers

AT

P.S - I have one of these companies still open for anyone in Aust ;-)

The FSA will be more than happy to help you out here but make sure you have a large lorry to pick up the paperwork.
http://www.fsa.gov.uk/
It is fine to invest your own money but as soon as you are trading for non-professional clients you need to get regulated. It is a fairly lengthy process, if you have any hair, you will likely not have by the end of it.

Hterm,

In order to manage other people's money, you will indeed need to be licensed.

This means that you, and your company, will need to be regulated by the FSA (Financial Services Authority).

In order for you to be personally licensed by the FSA you will need to satisfy a number of requirements.

Firstly, you will need to demonstrate that you have the necessary qualifications / experience to manage other peoples money. Don't worry , having a University degree is NOT a pre requisite.

You will howver need to pass a couple of exams in order to become a "registered representative". There are different categories and activities for which you can qualify. For investment management, you will need to be registered as "CF27" (This allows you to manage money. "CF21" allows you to offer advice).

The exams are fairly straightforward and consist of 2 multiple choice papers. One of those papers will cover Regulation, which everyone must take and pass (the pass rate is quite high, I think you have to achieve at least 80% correct answers or you fail). The second paper will require knowledge of your area of specialisation (securities /derivatives etc).

You will be required to learn and understand a huge amount of information, so don't get complacent in thinking that multiple choice is a walkover. If you don't learn all the detail, you won't pass. I know of a number of intelligent people with good degrees fail the exam a couple of times. I also know people without degrees who studied hard and passed first time.

You can get details about the exams from The Securities Institute in London. You can study by distance learning if you wish.

Once you pass the exam, that doesn't mean you are registered. You will need to send your pass certiificate to the FSA along with your CV and complete a questionnaire detailing all your qualifications / experience. Most importantly, they will check to see that you pass the "fit and proper person" test.

This means that you must demonstrate a sound financial background (no history of bankruptcies, good credit record, no criminal record, haven't been fired from previous employers for misconduct etc. etc.).

Once you have done this, you need to be employed by an FSA registered company to finally achieve registered status.

Getting your company FSA registered takes much longer and is quite tedious (it will cost you £5,000 non refundable ) just to complete the application form wheteher or not the company achieves regulated status. You will need to demonstarte that the company has sufficient capital adequacy requirements to operate in it area of chosen activity, meets reporting and compliance standards etc.

This may all sound complicated, but it it is achievable. It will take time and money however. Being 38 and without a University degree is not a barrier.

Be aware, that if you do manage people's money without being properly qualified and regulated
you can face 2 years in prison.

Qualifications needed to become an investment banker

Hi

I'm just wondering what specific qualifications are needed to become an "investment banker". Are these different to "Fund Manager" requirements - or do the two job descriptions basically refer to the same role?

Would Accountancy qualifications such as CIMA or ACCA be of much help as a good starting point/prerequisite into investment banking?

I ask because a friend of a friend has just started training to be a CIMA qualified accountant. I heard that after 3 years of qualifying he wants to go and work in "The City" as an Investment Banker. I suppose that becoming a qualified Accountant is a good idea, because if the Investment Banking stuff doesn't work out, he can always work in Accountancy. But are Accountancy exams a prerequisite, or necessarily all that relevant to investment banking?

Thanks a lot

jtrader.

ACCA has always a been a farily good way in as have Acturial qualifications. Lot depends on where you got qualified. I knoiw ACCA's working for the big 4 in the finance sector have always had good opportunities presented.

hmm Jayesh Manek springs to mind, running the manek growth fund, he was a chemist and caught the eye by winning the telegraph investment comp (if memory serves correct) caught Templeton's eye, gave him 5 million to work with, used to follow him a bit years back when he launched the fund. Initially above his chemists shop. Did well for a while but that was at the market top and he was looking for growth stocks and value, ok long term i suspect using regular investments pound cost averaging for 20 years maybe.

maybe you can get power of attorney on your friends and families money to select the investments on their behalf, as long as they have a similiar risk profile which matches your fund. hmmm can you get power of attorney for Joe publics monies? operating outside the FSA ??

jsd.

AC,


>>Once you have done this, you need to be employed by an FSA registered company to finally achieve >>registered status.


can being employed by his own company suffice for this requirement ?

First of all, Are the requirements different in the U.S.?

If no, Can someone explain these options in more detail?

1) Power of Attourney

2) Employer/Employee basis

3) Certification / Establisment of Business

4)Other Options?

aussietrader said:

Hterm,

I am in Aust and type the following from experience. I believe my comments are relevent to the UK. You can basically do whatever you want as an individual. People can give you their portfolios to manage and you can do it on an employee/ employer basis.

If you want to pool monies i.e group client funds into a single account then you will probably need a license to operate onshore unless you operate in a company structure. However to issue shares and raise capital from the general public you need a prospectus or disclosure document. This can be expensive to produce but I have created over a dozen public companies through a compliant template prospectus that is only 30 pages long. However, the funds are only ever raised because of the people involved not the quality of the disclosure document!.

If you went overseas (say BVI) and set up a company you could then attract investors offshore but this is fraught with inadvertant breaches of local law and can preclude you from accepting money from family, friends and domestic people.

Basically, I say - set up a company (plc or ltd) and whack together a compliant disclosure and then source the funds. Even if you raise GBP1m it is a start and if the returns are good you will eventually receive more money than you can handle.

A good idea is to get an accountant and a lawyer onthe board and give them profit share or similar for their expertise and iput to keep costs low.

Please realise I have extremely limited knowledge of the UK FSA laws so please do not rely on anything above. But as your laws are a derivative of the Antipodean ones I figure you must have picked up a few common threads from us ;-)

Cheers

AT

P.S - I have one of these companies still open for anyone in Aust ;-)

Click to expand...

Hi AT,

I am also in Australia, Melbourne in fact, and would like to hear more about setting up a investment company that allows investment funds to be raised from clients/family/friends.

Can you please elaborate more on this topic?

Thanks!
Mark

You can start with an interactive brokers friends and family account without registering with any supervisory organisation. Money stays in friend and family names, you make the investment decisions and ib allocates to the sub accounts automatically.

Hi Aussietrader - very interested in your posts. Have been having a good stalk at your advice. I'd be interested to hear about your line of work in Australia. I realise someone else has enquired after you also.

I'm new to this so not sure how you can make contant with me/I with you. I'll keep checking the thread for replies. Cheers, Upstarter.

An interesting thread that has been ressurected ........

heres some quotes / gems from the earlier years of this thread...........


In order to manage other people's money, you will indeed need to be licensed.

This means that you, and your company, will need to be regulated by the FSA (Financial Services Authority).

In order for you to be personally licensed by the FSA you will need to satisfy a number of requirements.

Firstly, you will need to demonstrate that you have the necessary qualifications / experience to manage other peoples money. Don't worry , having a University degree is NOT a pre requisite.

Once you pass the exams, that doesn't mean you are registered. You will need to send your pass certiificate to the FSA along with your CV and complete a questionnaire detailing all your qualifications / experience. Most importantly, they will check to see that you pass the "fit and proper person" test.

This means that you must demonstrate a sound financial background (no history of bankruptcies, good credit record, no criminal record, haven't been fired from previous employers for misconduct etc. etc.).

Once you have done this, you need to be employed by an FSA registered company to finally achieve registered status.

This may all sound complicated, but it it is achievable. It will take time and money however. Being 38 and without a University degree is not a barrier.

Be aware, that if you do manage people's money without being properly qualified and regulated
you can face 2 years in prison.


..............so if all else fails join the banking profession ?
N

fit and proper person" test is important in financial area. Trust can't be build easily.

I have gone down this road and it is a long and expensive one. I will give you a summary here of what is needed and what, as I see them, the options are. If you wish to ask further questions feel free.

First of all you can indeed setup private limited companies which, in effect, operate much like the proprietary trading shops. Each person buys into the company to achieve a share holding and the company then trades the funds. It is however a grey area and even a number of the big prop firms in the City who operate under the MiFID unregulated firm setup are now looking like they may need to go fully regulated, in fact most which came over from the US have gone straight down that route. This option can work if, for example, you have 10 friends each with £1M to invest but it does not work well for many smaller clients or indeed for the public at large.

A few people have mentioned trading under a friends and family setup. Whilst this is possible be very aware of one fact. As soon as you charge a fee for offering this service, which ultimately is what you will want to do, then you are deemed to be "carrying on a business" in the FSA's eyes and will need to be registered. There are also various thoughts on how many people you can do this for, even if you are doing it for free. Bear in mind if you have a 100 people you are managing for then you look very much like you are carrying on a business in the FSA's eyes, free or otherwise.

In my opinion going fully reg is the only real way to go if you are serious about it. Now the first option you have is to go under the umbrella of an existing FSA firm. There are very few who allow you to do this. Sure there are trading arcade type setups where they may apportion you some client funds, but if you want to run your own distinct operation, but just under their banner, then the companies doing this are very rare. The simple reason being that they are putting their entire FSA authorisation at the mercy of your trading. The few I did find willing to umbrella were first of all less than honourable in their practices and secondly didn't like a system unless it traded 10+ times a day on inflated spreads. The sad truth is many of these guys, even the FSA registered ones, will go churning accounts just to scoop in rebates. By the time the client is a few months in the churning has brought in more revenue than a standard fund manager would earn on fees in a few years. I could tell you some real horror stories!

So the final route, which is one I ended up walking, is getting all of the financial training under your belt and getting all of the appropriate FSA approvals in place. Luckily I had ten years experience in the City already, the financial qualifications alone do not set you up to pass the FSA's fit and proper assessment. I know a few firms in town who will do all of the work for the FSA approval for around £15-20k, however this does not account for the FSA's fees (a few £k) nor the ongoing fees and compliance requirements. You will also need to meet the FSA's capital requirements so, depending on the BIPRU level you are given, that could be £50k or £250k or more which must be cleared and accessible funds and not a loan or similar.

That was a very quick overview but I hope some of it was useful. As I mentioned I'm happy to take questions on it and will assist where I can.