Starting an Investment Company
Author: afni
Starting an investment company can be a tricky and fairly involved process, as there are several ways to get into the investment business. Some require large capital investments; others involve shoestring possibilities.
With the correct certification, starting your own investment company is fairly simple.
The following steps will help you take the necessary measures to correctly turn your dream and vision of owning your own firm into a reality.
Get licensed. You must be individually licensed to start an investment firm. Depending on the type of investments you plan to sell, you will need either a Series 6 or Series 7 securities license.
A Series 6 allows you to sell small investment products such as mutual funds and annuities.
A Series 7 license permits you to buy and sell large investments such as stocks and bonds on behalf of your clients.
Both licenses require you to pass a test administered by the Financial Industry Regulatory Authority (FINRA), formerly the National Association of Securities Dealers (NASD).
The fee to take the Series 6 securities test is $85. It will cost you $265 to take the Series 7 exam. Formally preparing for both exams is recommended (see Resources below).
If you plan to make real estate investments for others, you will need to hold a real estate license in most states.
Register your company. After you successfully pass the necessary tests and obtain a securities license, you must register your company with the Securities Exchange Commission (SEC) and your state before you can do business.
The application includes being fingerprinted and having criminal background and credit history checks done on you and your partners. After the SEC approves your application, you must also register with FINRA. The application documents are detailed and must be completed thoroughly. Registration applications are available from the SEC and FINRA.
To register with your state, also a requirement to be a member of FINRA, contact the North American Securities Administrators Association. This organization will direct you to the proper regulatory agency (see Resources below).
Raise enough capital. Be prepared to spend some money in the beginning. Aside from licensing fees, you must have working capital for real estate, office furniture and to hire an assistant.
Some companies even charge as much as a few thousand dollars in order to be an independent contractor for them. Having at least $30,000 to $50,000 to pay your business and personal expenses during your first year is also wise, unless you have an existing book of business.
Choose your products. Investment companies sell securities created by investment banking firms located on Wall Street. If you are a registered firm, you’ll have access to stocks, bonds, mutual funds, annuities and insurance products from wholesalers.
Start small, especially if you aren’t experienced with a wide spectrum of investments. For example, you may wish to sell mutual funds and life insurance until you build a solid book of business and are ready to start buying and selling stocks.
Find an office. An investment firm can set up shop virtually anywhere. However, depending on your market, some locations will serve better than others. In small towns, investment companies do well in small retail spaces among other businesses in the community.
In more urban environments, firms are often located in buildings with other businesses within the financial services industry, which is ideal for networking with other professionals. If you are unsure, contact a commercial Realtor who commonly works with clients in the finance industry.
Staff your office. If you are on your own as a broker-owner, you will need to hire a staff to operate your office. This may include an administrative assistant and other licensed representatives that pay you to use your office and/or a cut of their commissions.
Be an independent contractor. A simple way to start an investment firm is to become an independent contractor and operate your own office using a large firm’s name and registration status. If you choose this option, you will likely have to split commissions with your corporate office.
You will not, however, be required to register your own firm or hire other representatives to begin. You may also go to work directly for another firm as long as the commission splits are in your favor.
These options may be ideal for you, especially if you are new to the industry. By working for another broker at first, you will be able to build a customer base and learn from seasoned pros who know how to sell investments.
Posted in 
Tags: