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Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
Who needs a job? Bootstrap your way to building your own financial services firm
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Who needs a job? Bootstrap your way to building your own financial services firm

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From Tradestreaming.com 's 2012 Financial Career Bootcamp, Cale Smith explains how he left a hedge fund to boostrap his own firm, how much money you need under management and how much it will cost to …

From Tradestreaming.com 's 2012 Financial Career Bootcamp, Cale Smith explains how he left a hedge fund to boostrap his own firm, how much money you need under management and how much it will cost to launch.

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  • 1. Why look for a job? Start your own firm. Cale Smith Islamorada Investment Management February 21, 2012Tuesday, February 21, 2012
  • 2. • Since August 2008 • Value investing firm • Two funds: Tarpon & Gecko Folio • Just Spoke Funds®!Tuesday, February 21, 2012
  • 3. Why Islamorada?Tuesday, February 21, 2012
  • 4. Never a better time for spoke funds…Tuesday, February 21, 2012
  • 5. ”We must work to establish a "fiduciary society", where manager/agents entrusted with managing other peoples money are required... to place front and center the interests of the owners they are duty-bound to serve.” - JOHN BOGLE Founder, The Vanguard GroupTuesday, February 21, 2012
  • 6. Introduction 3 years down, 37 to go.Tuesday, February 21, 2012
  • 7. Stages of Growth One- One- One- man man + man + Firm V.A.’s FTE IIM is here now.Tuesday, February 21, 2012
  • 8. Welcome to Small Business!Tuesday, February 21, 2012
  • 9. Putting up good numbers is goal #1.Tuesday, February 21, 2012
  • 10. Initial Focus #2 (Your Investors)Tuesday, February 21, 2012
  • 11. Initial Focus #3 Trade-offs… - One-man firm - Old car - Office in a former explosives storage facility?Tuesday, February 21, 2012
  • 12. Natural Fit Spoke Funds & Value Investing - Minimal trading - Excellent cost control - Long-term emphasis - Certain ethics - Right kind of investor!Tuesday, February 21, 2012
  • 13. Three Approaches 1. 2. 3. Long Term Short Term Efficient Market Fundamental Fundamental Technical (Value) Asset Allocation Changes Momentum Gaps Price/Vol ChartingTuesday, February 21, 2012
  • 14. Value Investing “We want the business to be one (a) that we can understand; (b) with favorable long- term prospects; (c) operated by honest and competent people; Net worth $50B and (d) available at a very attractive price."Tuesday, February 21, 2012
  • 15. Top 3 Problems with Mutual Funds 1. $400K/year 2. In a box 3. Model is broken!Tuesday, February 21, 2012
  • 16. “Model is Broken” The vast majority of mutual funds… chronically underperform, charge fees that are too high, own too many stocks and trade too much. Mutual funds force taxes onto their investors, make their fund managers inaccessible and spend investors’ money as if it were their own. The majority of mutual fund managers do not own a single share in the funds that they manage.Tuesday, February 21, 2012
  • 17. Mutual Funds A good idea gone wrong.Tuesday, February 21, 2012
  • 18. Top 3 Problems with Hedge Funds 1. No advertising 2. No retirement assets 3. “Deserving vs. Earning”Tuesday, February 21, 2012
  • 19. Hedge Funds “A compensation scheme masquerading as an asset class.”Tuesday, February 21, 2012
  • 20. Criteria 1 – The “no lackey” rule 2 – Grow my own wealth best way I know how 3 – Something I’d want my friends and family to invest in 4 – Stay focused on researchTuesday, February 21, 2012
  • 21. Spoke Funds All in it together.Tuesday, February 21, 2012
  • 22. Definition A spoke fund is a group of separate investor accounts linked to a portfolio containing most of the liquid net worth of that fund’s manager.Tuesday, February 21, 2012
  • 23. Spoke Vs. Mutual Fund Pros: - Lower start-up costs - More flexibility in investment style and strategy - Easier administration - More transparency - lower opex Cons: - Direct retail sales model (Geico vs State Farm) - Educational hurdleTuesday, February 21, 2012
  • 24. Spoke Vs. Hedge Fund Pros: - You can advertise! - Lower start-up costs - Easier administration - More transparency - You can look Mom in the eye Cons: - Not ridiculously lucrative - Compliance (though investors may see as a pro) - No shorting and only listed stocks (on FOLIOfn)Tuesday, February 21, 2012
  • 25. Key Vendor • Met all my original criteria and then some. • Most investor-friendly (website, security, insurance, tax lots, trading windows). • Most portfolio manager-friendly (admin, compliance, support).Tuesday, February 21, 2012
  • 26. Taxes and Trading Average Mutual Fund Turnover? 89% Sources: Tweedy Browne, MorningstarTuesday, February 21, 2012
  • 27. Why Fees Matter Average Mutual Fund Fees? 1.73% Sources: Karceski, Livingston, ONeal, "Mutual Fund Brokerage Commissions," January 2004. Shoven, Dickson and Sialm, "Tax Externalities of Equity Mutual Funds," April 2008.Tuesday, February 21, 2012
  • 28. Economics of Spoke FundsTuesday, February 21, 2012
  • 29. Scalability 1 PM : 500 Investors or more ? The Buffett Cap: $20M AUM x 90 bips $180,000 Rev :: 500 clients w/ $40K accounts and at 10 clients per month, reach $20M in 4 yearsTuesday, February 21, 2012
  • 30. Planning Guidelines Assume $10K to launch and $25K a year in opex to run standalone spoke fund company. Revenue: AUM x bips (to firm not FOLIO) $10M x 0.90% = $90,000 Business Breakeven (@90 bips, all big accounts): $4.0M AUM ($4m x .009 = $36k Rev and $35K cost)Tuesday, February 21, 2012
  • 31. Key Equations What should my account minimum be? Account Breakeven: Total Yearly Account Cost / Total Expense Ratio = Minimum Account Breakeven Say FOLIOfn cost is $100 and ratio is 1.25% Breakeven = 100/.0125 = $8,000 account Note: Lower your fees, higher your minimumTuesday, February 21, 2012
  • 32. Key Equations To subsidize or not to subsidize? Subsidy Amount: [Expense Ratio x (Acct. Breakeven – Min. Investment )] x Number of Accounts = Amount to Subsidize [.0125 x ($8,000 - $5,000)] x 20 = $750/year Note: Assets attract assets. Key questions: cost to acquire? Will account refer more than $37.50?Tuesday, February 21, 2012
  • 33. Possible Pre-Launch Budget Compliance & Reg (RIAinaBox): $2,500 Computer and Gear: $1,500 Software: $750 Stationary & Printing: $750 Website/Blog: $2,000 Grab-Bag (Company Docs, Office, Research): $2,500 Total: $10,000Tuesday, February 21, 2012
  • 34. Possible Post-Launch Budget Advertising: $10,000 Compliance Fees: $500 Office Expenses: $5,000 Stationary & Printing: $500 Research: $5,000 Phone, IT & Internet: $1,500 Licenses, travel, meals: $2,000 Subsidies: $500 Total: $25,000Tuesday, February 21, 2012
  • 35. Running A Spoke Fund CompanyTuesday, February 21, 2012
  • 36. Org Chart Year 1 YouTuesday, February 21, 2012
  • 37. Eventual Org Chart Portfolio Sales & Manager Admin Marketing -CEO/CIO -QuickBooks - Online -Strategy -Compliance - Local -Research -Cust Svc - Collateral -Trades -Onboarding - Funnel -Writing = Could be virtual assistantsTuesday, February 21, 2012
  • 38. Sales Funnel Prospect: “Lead that signs up for monthly newsletter” (600). If 5% convert, means 30 want to meet or call If 50% of those convert, Then 15 new clients. Key is increasing newsletter sign-ups to acquire investors at cost of $0.00Tuesday, February 21, 2012
  • 39. Marketing Mix During Start-Up Online: website, blog, FB, Twitter, newsletter, SEO Grassroots: events, seminars, associations, sponsorships 70% Online 20% Grassroots PR: press releases 5% Public Relations Branding: Paper ads, 5% Branding direct mail, mentions in pressTuesday, February 21, 2012
  • 40. Importance of TechnologyTuesday, February 21, 2012
  • 41. Tools I Use EchoSign – secure electronic signatures WordPress – easy blog and site updates Evernote – Operations Manual and random notes QuickBooks Online – easiest way to use VA Google Reader – Blogs, sites and SEC filings Things & Google Calendar – Essential FormRouter (moving to WuFoo) – client onboarding iStockPhoto.com – cheap images for collateral Highrise – perfect CRM Basecamp – to coordinate with VA’s DropBox – instead of a server Shoeboxed – scan receipts ScreenFlow – movies on the Mac Tuesday, February 21, 2012
  • 42. Top 5 Tools 1. iPhone 2. EchoSign 3. Evernote 4. Things 5. Highrise Tuesday, February 21, 2012
  • 43. EchoSign “Online Electronic Signatures.” Totally secure, totally quick, totally a timesaver. From Free to $400 a month. Saves hours and $$$ compared to faxing, Fedex’ing routine. Tuesday, February 21, 2012
  • 44. EverNote “Like a brain in the cloud.” Capture everything, organize it and find it fast. From anywhere. From Free to $50 a year. Home of our Operations Manual. Best place to put random thoughts, passwords, lists. Tuesday, February 21, 2012
  • 45. Things “To-do list on steroids.” Task management and general productivity. Costs $50 Best way I’ve found to really stay on top of everything. Tuesday, February 21, 2012
  • 46. Highrise Most important tip I got when I started out: “Get yourself a good CRM tool.” From $29/mo to $150/mo Absolutely critical to advancing the sales funnel. Tuesday, February 21, 2012

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