If it will come from the 40K/IRA portfolio, will it be treated as a withdrawal from my friend/relative investment portfolio. Is another alternative asking my friend/relative to pay me directly from another source not her 404K/IRA account? Is this treated as a management expense from my friend/relative perspective and income to me? How is this done? Mind you, she is the one asking me to manage her investment and wanting to pay me for my service. Any response will be appreciated.
2007-02-20 06:32:24 · 6 answers · asked by Arnel T 1 in Business & Finance ➔ Investing
Technically, you are not managing the assets of a 401k or an IRA. You are just a sales agent who acts a middle man on bringing client to the investment companies and then you earn commissions. The people who are managing the assets are professional money managers who only desire is to achieve growth.
Sorry, you can not collect "fees" for your service. What you will get is annual 12b-1 fees from mutual funds, which isn't really much. But it grows larger as your assets under management grows too. It doesn't come out of your client's pocket, it comes directly from the mutual fund as part of its operating expense.
When you are selling new shares to a client or the client is buying new shares without you needing to be there, you will earn commissions.
So tell your client that she should not pay you a fee for your service since it is illegal under SEC laws. You are already getting paid from commissions and annual 12b-1 fees, so there is no reason you should be charging a fee for your service. Plus your company will charge an annual custodian fee on the IRA, which is usually less than $25/year in most companies.
2007-02-21 07:42:00 · answer #1 · answered by Anonymous · 4⤊ 0⤋
Personally? I'd avoid taking payment. Opens you up to a whole lot of fiduciary liability and possible prohibited transactions issues that you don't want (esp if it's a relative and not a friend). You can't collect from her portfolio unless you're a licensed advisor. So if she's paying you out of pocket it's just better if she buys you and your family a steak dinner every now and then.
2007-02-21 05:08:57 · answer #2 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
Set an hourly rate for yourself and have her pay you direct.
She may be able to deduct it from her taxes as an investment expense. Have her ask her accountant.
You would have to declare it as income on your taxes.
You won't be truly managing her money. You will be making recommendations which she can decide to utilize or not.
I hope that you do your homework and produce at least a return of 9% per year and that your fee is no more than 1% of the value of the portfolio.
Good luck!
2007-02-20 06:43:00 · answer #3 · answered by PeaceNow 2 · 0⤊ 1⤋
Since she is your relative/friend, i would suggest you to advise her to pay you out of her pocket and you'd want to be considerate when it comes to fees. She trusts you to do her investment and i'm sure you'll treat her money like yours. Since you're not a licensed money manager, you're not entitled to any fees nor she can claim investment expenses on her taxes and any money you recieve should not be reported either as income. If she is willing to "gift" you money for your help, i would reccomend 15-20% on investment gains every year payable to you.
2007-02-20 07:10:26 · answer #4 · answered by momach21 2 · 0⤊ 0⤋
If you are not a licensed broker handling the account, don't expect to collect any fees. If this is personal, then just ask her to pay you a fee out of her pocket.
2007-02-20 06:45:44 · answer #5 · answered by ThePerfectStranger 6 · 0⤊ 0⤋
You must be properly licensed to manage money for someone else. Failure to do so could subject you to strong penalties. I would be very careful with what you are doing as it is filled with potential problems - the least of which is how you are going to get paid.
2007-02-20 10:38:32 · answer #6 · answered by planningresult 4 · 0⤊ 0⤋