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Starting a Mutual Fund Company Online – A Complete Guide

Are you interested in starting a mutual fund company online? If YES, here is a complete guide to starting a mutual fund company with NO money and no experience.

Okay, so we have provided you an in-depth sample mutual fund business plan template. We also took it further by analyzing and drafting a sample mutual fund marketing plan backed up by actionable guerrilla marketing ideas for mutual fund companies. In this article, we will be considering all the requirements for starting a mutual fund business online. So put on your entrepreneurial hat and let’s proceed.

What is a Mutual Fund Company?

A mutual fund is a company that pools and collects money from people who are interested in making investments and goes ahead to invest their money in securities such as bond, shares, stocks and short term debt. Every investor owns shares, which represent a part of the holdings of the fund.

Institutions or individuals invest in a mutual fund by buying shares issued by the fund which then uses the cash received to invest in bond, shares, stocks, short term debt and other investments. The total holding of the mutual fund are known as its portfolio and every investor shares from the returns and gains on the fund’s portfolio and enjoys various benefits. Starting a mutual fund company could be a complicated affair and it is usually done by the fund sponsor or advisor. If you are hoping to start a mutual fund there are a lot of responsibilities for you to take care of.

What Does It Take to Start a Mutual Fund Company Successfully?

For a start, you have to be a registered investment advisor. As the fund sponsor, you will have to bring together the group that will start the fund including the individuals or entities that will manage or operate the fund. The sponsor provides a fund manager officers and affiliated directors to look after the fund and employs unaffiliated people to act as independent directors.

You will also go ahead to register the company under the state law where you wish to launch the business. Also if you intend to sell shares to the public you will also have to register with The Security and Exchange Commission (SEC). It should be noted that each state has its own laws and regulations governing mutual fund companies and its sponsor and this can be complex especially when preparing the paper work to show that you are ready and set to abide by the laws and regulations. Therefore, it is important to get legal assistance to help you prepare the paper work properly and adequately.

A fund sponsor is usually the initial investor and shareholder that will provide the “seed money” that creates the funds that starts the company and this is done in accordance with the company’s investment policies and objectives as stated in the documents submitted with SEC. As a fund sponsor you will serve as expert investment adviser on money management issues and you should be much better than the average investment adviser and in the long run produce better results.

As the fund sponsor you will have to adhere strictly to the federal laws as well as the prospectus of the mutual fund which states that all funds investment must diversified appropriately. Diversifying the investment portfolio helps in reducing the risk of a security that performs poorly as this can lower the value of the fund’s total portfolio. You will have to carefully monitor the portfolio of the fund in other to protect the investments of shareholders.

Basically, starting a mutual fund could be tedious, stressful and challenging but once you are well prepared and have the relevant expertise and the required support it is a business you can try out.

Starting a Mutual Fund Company Online – A Complete Guide

  • The Mutual Fund Industry Overview

The mutual fund industry is constantly growing as more people realize the benefit of making investments in a mutual fund which they consider easier safer and better.

These days a lot of people are busy with work, business activities and personal issues that they hardly have the time and the expertise to make investments and monitor their progress. This is why people opt for the option of mutual funds that have qualified professionals to look after their investments and thus it has become a popular choice for people over the years and has led to the growth of the industry in the United States of America.

  • Interesting Statistics About the Mutual Fund Industry

The introduction of mutual funds into the United States of America was in the 1890’s but it gained popularity in the 1920’s. Closed-end funds were however more popular than open end funds which only accounted for 5% of the $27 billion in total assets within the industry.

After the event of the stock market crash and confidence returned to the market in the 1950’s, the mutual fund industry also began to grow and by 1970, there were about 360 funds having $48 billion in assets.

There were over 15,000 mutual funds in the United States at the end of 2014 with $18.2 trillion in combined assets. Statistics show that the percentage of households having investments in mutual funds has steadily grown over the years.

In 2014 a survey showed that about 43% of US households or about 55 million people owned mutual funds and this comprised of married individuals or people living with their partners, college graduates and full-time or part-time workers. Statistics also show that they bought their mutual funds through four major sources including employer-sponsored retirement plans, fund supermarkets, investment professionals and directly from fund companies.

People also look to invest in mutual funds because of its numerous advantages. Investors have their funds managed by professional experts who help with the purchase and sale of securities and monitor their performance. Also investing in a mutual fund lowers the risk of shareholders as their investments are spread over a wide range of assets.

People are able to invest in a mutual fund than buying individual stocks because a mutual fund buys and sell several amounts of securities at a particular time making its cost of transaction and trading cost lower allowing them to have lower investment requirements, meaning people with little amount of savings can join the fund. In mutual funds investors can also request for their shares at any time to be transferred to cash and given to them and this is done easily.

The factors and incentives that makes an entrepreneur go into the mutual fund industry is the ability to make good profit as there are several people interested in the services.

Starting a Mutual Fund Company Online – Market Research and Feasibility Studies

  • Demographics and Psychographics

Every industry has its own factors and statistics that make it unique. The demographic and psychographic compositions of people who need the services of mutual funds come from several sectors of the society. Below is a list of the people and organizations that need the services of mutual funds:

  • Companies
  • Finance houses
  • Households
  • Investors
  • Small businesses
  • Workers
  • Married couples
  • Students
  • Businessmen and Businesswomen

The Level of Competition in the Mutual Fund Company Industry

Remaining a top player in the mutual fund industry will depend largely on your management skills, decision making skills and your expertise. Though this industry is not an all comers affair, there is still stiff competition which means you have to be on top of your game to survive.

Coming into the industry as a start up with the intention of being a major player could be difficult as there are already established organizations with proven track records but this can be achieved with proper and careful planning. What you should do first of all is to get in touch with your business and financial contacts you have made over the years and throughout your career and inform them of your decision to start the mutual fund.

Another thing you can do to avoid competing directly with the major players in the industry is not compete for their clients but source for your own clients. This you can do by introducing your services to individuals, small businesses and companies who are yet to have such an investment.

List of Well – Known Brands in the Mutual Fund Company industry

Well-known brands in the business help secure the investment of shareholders as well as making profits for them through good leadership and management along with professional expertise making it a very vibrant and competitive industry.

The following is a list of some of the best mutual fund companies in the United States of America:

  • Pacific Funds
  • Acadian Funds
  • Allianz Funds
  • Calvert Investments
  • Capital Management
  • Diamond Hill Funds
  • First Investors
  • Hartford Mutual Funds
  • Ivy Funds
  • Lmcg Funds
  • Meridian
  • Oak Associates

Economic Analysis

Starting a mutual fund requires a lot of hard work as you will be managing the funds of investors who will be hoping for good returns. For you to manage the business and run it efficiently you will need to conduct an economic analysis to prevent any threats or risks that can negatively affect and prevent the business from succeeding which is common when trying to start a new business.

When setting up the business though important you do not have to bother yourself only about finding a good office space in a great location as there are other aspects of the business you need to critically consider to help make it successful.

For instance this is a business that thrives on investors trusting you with their funds as well as having confidence in you to provide them with profit. To achieve this you have to go all out to employ the top professions as this will help you attracting shareholders and great investments.

Setting up and running a mutual fund company can be quite expensive mainly due to the start-up costs, registration costs and value of assets required by the regulators as well as the hiring of top notch professional experts needed by the business.

If you can achieve all these and have a good prospectus and company profile stating clearly your goals and objectives then you should not have much difficulty in people buying into your ideas and plans and acquiring investors.

Is a Mutual Fund Company Worth Starting from Scratch or is Buying a Franchise Better?

This type of business can be started from scratch if you want absolute control over your business. You can also transfer ownership to your children or sell the franchise later in the future. If you are on the other hand not interested in going through with the stress associated with starting new businesses from scratch, you can go ahead and buy the franchise of a successful company.

Possible Threats and Challenges You Will Face When Starting a Mutual Fund Company

There are many factors that can serve as potential challenges when starting the business. Mutual Fund Company can face threats from policies from government which could change over time and global recession which could affect people from making investments.

Other challenges include the cost of running a mutual fund which is very expensive. Costs spent on administration processes, employee salaries to investor’s statement cost a lot. Another cost worth considering is the fees you charge which could make investors avoid your mutual fund.

For instance you could decide to charge your investors certain annual fees as well as a percentage of the amount realized from selling your investors stocks. These fees known as service charges could be considered a bit too much by your investors making them not to invest in your mutual fund.

Another threat you will have to deal with is the issue of investors trust and confidence. Some investors could question your capabilities and competence and actually feel they could a better job than you especially if the mutual fund loses money. This becomes a major problem as investors feel they are the only ones losing out as the manager still gets paid despite the loss of funds.

Dilution could be another threat as it could affect the business negatively. This is possible if you have too much diversification in the business. Because funds are invested in different companies, a lot of returns on few investments most times do not make a lot of difference on the overall return.

Dilution can also refer to a successful fund becoming too big. This happens when money placed into the mutual fund has become a great success and the manager has trouble finding a good investment for all the money obtained.

Starting a Mutual Fund Company Online – Legal Issues

  • Best legal entity to use for a Mutual Fund Company

When starting your mutual fund business, there are various legal requirements that you will need to satisfy. There is a need to establish the mutual fund business legal structure, whether it is an LLC or a corporation.

To choose a legal entity for your company, you have the option of choosing from a general partnership, a limited partnership, an LLC, a “C” corporation, or an “S” corporation. These different forms of legal structure for business have advantages and disadvantages; you should therefore weigh your options properly before making your choice on the legal structure for your company.

There are some factors you should consider before choosing a legal entity for your company such as limitation of personal liability, admission of new owners, ease of transferability and investors’ expectation and tax issues. Take your time to study the various legal entities to determine the best one to use for your company, and then you will agree that an LLC is the most suitable.

Catchy Business Name ideas Suitable for a Mutual Fund Company

To choose a name for your company, you need a name that gives your client and idea of what your company does and one that people can easily remember so that they can easily find your business. The following are samples of business names you can use for your mutual fund business:

  • The American Investors
  • Capital Funds
  • Lord Investments
  • Guardian Management
  • Cardinal Trust Company
  • Eagle Investments
  • Ivy Investors
  • Oakland Funds

The Best Insurance Needed for a Mutual Fund Company

To set up a business in the United States, you need to have some basic insurance in place as required by the industry you want to operate in. make a budget for insurance and get in touch with an insurance broker to direct you in choosing the right types of insurance and also assist you in assessing the risk involved in the business.

The following are some of the basic insurance covers that you should consider buying if you want to start your own mutual fund business in the United States of America;

  • General insurance
  • Health insurance
  • Risk Insurance
  • Payment protection insurance
  • Workers compensation
  • Business owner’s policy group insurance

Intellectual Property Protection and Trademark

If you want to set up a mutual fund business, then you should file for intellectual property protection. Filing for intellectual property protection ensures that your company’s logo, documents, software applications and of course the name of your company.

Filing for intellectual property protection and registering your trademark in the United States is done at the USPTO, where you are expected to file an application with the USPTO. The final approval of the trademark is then subjected to the review of attorneys which is a requirement of the USPTO.

Is Professional Certification to Start a Mutual Fund Company?

If you work in the mutual fund industry, you need to get professional licensing from the Financial Industry Regulatory Authority (FINRA). This way you will have an edge over your competitors. As you and members of your team gather more relevant certifications, it will be easier to get clients to patronise your business.

The following are the professional certification that you or your key staff should look towards acquiring:

  • Chartered Financial Analyst (CFA)
  • Mutual Fund Distribution Certification

List of Legal Documents You Need to Run a Mutual Fund Company

In The United States of America, the mutual fund industry is one of the industries that is highly regulated. If you are considering setting up a mutual fund company, you are expected to meet the legal documents requirements as specified in the constitution of the United States.

The following are some of the basic legal documents that you are expected to have in place if you want to start a mutual fund company in the United States of America;

  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Non – disclosure Agreement
  • Memorandum of Understanding (MoU)
  • Employment Agreement (offer letters)
  • Operating Agreement
  • Company Bylaws
  • Insurance Policy

Writing a Business Plan for your Mutual Fund Company

If you are interested in setting up a mutual fund company, you should consult the services of experts to help you put together a good and workable business plan. If you can do this, you will be able to run a successful business.

Having a business plan will serve as a guide that you will use to manage the business successfully. The method of running the business through trial and error methods will be reduced and you can manage your business properly knowing the right thing to do as different occasions demand and how to deal with the issues of challenges, growth and expansion.

Endeavour to write a detailed business plan for the mutual fund business such that it will encompass all aspects of your business. In writing the business plan, make sure you include the facts, figures and other indices as related to the import and export industry in the United States where you want to set up the business.

The purpose of writing a business plan is not just for the sake of owning a business document. It is meant to be a compass for you to effectively set up your business from scratch. It should have an outline that covers the processes you want to use running and growing the mutual fund company. Make sure that you don’t over project when you are putting figures on your income and profits. As a matter of fact, you should try to underestimate so that the reality does not ruin your plans.

The following are some of the key areas that should be covered in your business plan and they include the following:

Executive summary and Company’s descriptions: in this place, you are expected to write about the business concept, the company description, the mission and vision statement of the company and where you intend to locate the company. You should also include information about your intent to sell the franchise of the company or open outlets in different areas of the United States of America and any other parts of the world.

Some other key components that should be in the business plan are SWOT analysis, products and services offering, competitive analysis, marketing and sales analysis / strategies, costing and financial projection, market goals, pricing, target market, expansion and growth strategies, publicity and advertising strategy, budget and how to raise start-up capital.

Detailed Cost Analysis for Starting a Mutual Fund Company

There are several expenses that you would have to make before successfully launching your own private security company. It is important to state that the location you choose to launch your business will definitely impact on the overall cost of starting the business which is why it is very important to have concluded and analyzed your feasibility studies and market survey before drawing up a budget and sourcing for funding for your business.

Here are some of the basic costs you must look towards fulfilling when starting a private security company in the United States of America;

  • The Total Cost of incorporating the Business in the United States of America – $750.
  • The Cost for Insurance, permits and license – $5,000
  • The Cost of renting a suitable office facility with enough space in the United States of America (including re-construction of the office facility) – $50,000.
  • The Total Cost for furnishing the office (computers, telephones, fax machines, printers, furniture, filing cabins, and other electronics) – $15,000
  • The Cost for Launching a Website – $700
  • Other Expenditure (Signage, Business cards, Adverts and Promotions) – $2,500
  • Miscellaneous – $1,000

Going by the report from our research and feasibility studies, we will need about $150,000 to set up a mutual fund company in the United States of America.

On the average, you would need up to $2,000,000 million to start a medium scale mutual fund company in the United States of America. If your intention is to start a large scale mutual fund company, then you should look towards budgeting about $20,000,000 million and above.

  • Financing Your Mutual Fund Company

If you want to start your mutual fund company, you will need to pool money from investors so as to be able to start the business. There will be a need to get a decent office facility, furniture, equipment and capital to pay for salaries and utility bills for at least 3 months. Once you have a good business plan in place, then you will be able to convince your investors to put down their money for the financing of the mutual fund company.

The following are some of the ways you can put money together for a mutual fund company:

  • Getting money from your personal savings and the sale of personal stocks and properties
  • Raising money from other investors and business partners
  • Pitching your business idea and applying for seed funding
  • Sourcing for soft loans from members of your family friends

Choosing a Suitable Location for Your Mutual Fund Company

It is important to make some consultations before you choose a location for your company. This is important because locating your business in the wrong place can adversely affect the company. Even though it is challenging to get an office space in a good location, it is critical to the success of the business you intend to run. This is because a company located in a wrong business location will in due course fail and close up shop.

If you therefore want to build a mutual fund company that is successful, endeavour to get an office space in a location that has healthy business activities. Once you are able to build a successful brand, you can go ahead to open more branches of your company in any part of the world and be a success at it.

The following factors should be considered if you want to choose a location for your mutual fund company:

  • The operating style
  • The demography of the location
  • Closeness to other businesses and services
  • Accessibility to the office location
  • Enough parking space for your clients
  • Knowledge of the local laws and regulations in the state
  • The traffic situation
  • Security of the business location
  • The zoning regulations of the area to determine if your business can be conducted in the building
  • The kind of infrastructure available in the building in terms of requirements to support the high technology needs of modern day business

Starting a Mutual Fund Company Online – Technical & Manpower Details

To set up an a mutual fund business, you need to equip your office with necessary things like computer, phone lines, fax machine, printer, photocopier, filing cabinets and furniture as these are the basic needs that part of your start-up capital should be spent on.

Make a choice between renting and leasing of an office space for your business activity. The choice should be based on the budget you have at your disposal and the size of the company you intend to start. If you have a considerable amount of money, you can consider leasing an office place to plan for the long term.

Working with the budget you have, you need to employ members of staff for your team. You need a chief operating office, an admin manager/human resource manager, a marketing manager, an accountant, an auditor and a receptionist. To start the business, a minimum of 10 staff is fine to manage a mutual fund business. You will also need to engage the services of some experts from time to time on an as needed basis.

The Services Process Involved in the Mutual Fund Industry

The services process involved in the mutual fund industry depends on the niche of mutual fund investment services a company is into. Investors bring their fund to be invested in the mutual fund company, once the money is invested; the mutual fund company then charges a fee for the services they have rendered.

Starting a Mutual Fund Company Online – The Marketing Plan

  • Marketing Ideas and Strategies for a Mutual Fund Company

When you are writing the marketing idea for a mutual fund company, make sure you create a compelling profile for yourself and the company and this should include the profile of the board of directors and the management team. Once you have highly skilled and trustworthy people on board, your mutual fund company will have leverage in the market.

Here are some of the platforms you can utilize to market your mutual fund business;

  • Place advertisements in relevant business magazines, radio and TV stations and also make yourself available for financial related interactive sessions and talk shows TV and Radios)
  • List your business on local yellow pages and directories online and offline
  • Attend financial related seminars, expos and business fairs
  • Take advantage of the internet to promote your business
  • Create different packages for different group of clients in order to work within their budgets.
  • Engage in direct marketing and also email marketing.
  • Through word of mouth

Possible Competitive Strategies for Winning your Competitors in the Mutual Fund industry

It can be quite challenging being a new mutual fund company just starting out in the industry. If you are able to choose the right people to work on your team and with the right expertise, you will make it very soon in the industry. Being creative and paying attention to details will go a long way in defining the way your company is run.

You can also form alliances with key players in the mutual fund industry to make your business well positioned and have an edge over your competitors in the business.

Possible Ways to Increase Client Retention for a Mutual Fund Company

Making sure your customers are satisfied is one of the ways you can retain them no matter the kind of business you are engaged in. Practising good customer relationship management helps to keep and increase patronage from your clients and through word of mouth about the kind of services you render; they tend to bring in more business for the company.

Poor service delivery on the other hand will make your clients look towards other sources to get their services. As a result of this, most companies end up losing their client and potential new ones. Once you can improve on the quality of your service delivery, then you are in business as your customer won’t have any reason to drop your services thereby engage your competitors.

Engaging in good customer relationship practises never fails in helping a business to retain and get new clients. This you can achieve when you keep a proper database of your clientele or buy CRM software to keep up with your clients. This will enable you have the important information you can use to keep in touch with them on important occasions such as birthdays, anniversaries and holidays.

Strategies to Boost your Mutual Fund Brand Awareness and Create a Corporate identity

To create a brand identity for your mutual fund business, the quality of the clients you have worked for before can give a big boost to your brand. Work with your consultants to help you put together an advertising and publicity strategy that will help you capture your target market.

Make sure that the lines of communication are clear and the strategies that have been put in place makes your brand visible and also ensure that good publicity materials and winning jingles are used for the branding. The following are the kind of platforms you can leverage on to create a corporate identity and boost your brand awareness:

  • Advertise your business in relevant magazines
  • List your company on local directories and yellow pages (both online and offline)
  • Promote your business on satellite TV stations and radio stations.
  • Put out jingles on radio
  • Attend expos, seminars, and business fairs with the aim of creating awareness and promoting your brand
  • Engage in direct email marketing
  • Leverage on the internet by using social media platforms and your company’s official website to promote your business
  • Brand your company official vehicles and make branded shirts for your members of staff to put on during work hours
  • Ensures that your workers wear your branded shirts at all times during working hours and also make sure you brand all your company’s official vans, trucks and cars et al.

Creating a Suppliers / Distribution Network for a Mutual Fund Company

There is a lot of room for networking in the mutual fund industry as the companies cannot work in isolation. They work in line with updates and information they get from the security exchange commission. It is also important to note that there is room to form strategic partnership with other companies in the industry therefore it is necessary to have a good network with one another.

Tips for Running a Mutual Fund Company Successfully

For your business to be successful, it is important to make sure that all members of your staff work in harmony with one another. Being the Chief Executive Officer, you have the duty of steering the business in the right direction. Try as much as possible to create time for official meetings to be held consistently so that important issues relevant to the smooth running of the organization can be discussed and create room for feedback.

Carry out performance appraisals for your member of staff and use the results obtained to correct any error in the way they carry out their duties. Identify trainings that they can go for to improve on their performance. Encourage them to go for certifications and sponsor them partially or fully.

On a final note, keep an open door policy to encourage staff and client to be open to you. Give rewards to those that perform excellently within the organization to inspire healthy competition within the organization.

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