Do you want to start an investment portfolio management company? If YES, here is a complete guide to starting an investment portfolio management business with NO money and no experience.
Okay, so we have provided you an in-depth sample investment portfolio management business plan template. We also took it further by analyzing and drafting a sample investment portfolio management marketing plan backed up by actionable guerrilla marketing ideas for investment portfolio managers. In this article, we will be considering all the requirements for starting an investment portfolio management business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Why Start an Investment Portfolio Management Firm?
- 1. Understand the Industry
- 2. Conduct Market Research and Feasibility Studies
- 3. Decide Which Niche to Concentrate On
- 4. Know Your Major Competitors in the Industry
- 5. Decide Whether to Buy a Franchise or Start from Scratch
- 6. Know the Possible Threats and Challenges You Will Face
- 7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
- 8. Choose a Catchy Business Name
- 9. Discuss with an Agent to Know the Best Insurance Policies for You
- 10. Protect your Intellectual Property With Trademark, Copyrights, Patents
- 11. Get the Necessary Professional Certification
- 12. Get the Necessary Legal Documents You Need to Operate
- 13. Raise the Needed Startup Capital
- 14. Choose a Suitable Location for your Business
- 15. Hire Employees for your Technical and Manpower Needs
- 16. Write a Marketing Plan Packed with ideas & Strategies
- 17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Why Start an Investment Portfolio Management Firm?
If indeed you are a core professional who has successfully cut your teeth in the investment and financial services industry and you want to become your own boss, one of the thriving and profitable professional businesses that you can launch is an investment portfolio management firm.
Investment portfolio management has to do with starting a financial consulting business that helps individuals, corporations, and even governments in managing their investment portfolios and financial capital by acting as the client’s agent in the issuance of securities and investing. This kind of venture is such that needs the effort of more than one person and it is worthy to note that this business is very lucrative.
An investment portfolio management services business is one of the businesses that an entrepreneur can successfully start, perhaps with a functional home office without breaking the bank for cash. At the same time, big time investors can also leverage on the high demand for professional investment portfolio managers by larger corporations to set up their own well – organized firms in strategic locations within business districts in the united states of America.
It is very important that you analyze the existing investment portfolio management firms in and outside of your area. Also, you would be required to check the existing competition so as to know their strengths and weaknesses. Knowing the weaknesses of the existing investment portfolio management firms means that you would be able to learn from their mistakes and in turn come up with a better and more preferred investment portfolio management firm devoid of the mistakes and weaknesses of others.
So, if you have done the required feasibility studies and market research, you might want to venture into this business.
Starting an Investment Portfolio Management Firm – A Complete Guide
1. Understand the Industry
The investment portfolio management services industry comprises of firms that actively manage assets for individual and corporate clients. Investment portfolio managers have the authority to make investment decisions and generate revenue through fees that are based on service and portfolio performance. Generally, players in the industry manage assets for investment vehicles such as mutual funds, hedge funds and variable insurance products et al.
Despite recent volatility in global capital markets and an investor push toward passively managed funds, the performance of the investment portfolio management services industry is expected to improve going forward. Industry operators generate revenue from fees which are largely calculated as a specific share of total assets under management (AUM).
It is on record that by 2012, the revenue generated in the industry passed pre – recessionary levels. Plus, the Industry revenue is projected to grow in the coming years. Improving market conditions after poor global equity returns in 2016 will push up stock returns and bond yields, causing asset under management to grow going forward. So also, demographic trends are also expected to increase demand for the services of investment portfolio managers.
The Investment Portfolio Management Services industry will continue to experience growth in all parts of the world especially in developed countries such as United States of America, Canada, united kingdom, Germany, Australia, South Korea, Japan and China et al.
Statistics has it that in the United States of America alone, there are about 20,247 licensed and registered Investment portfolio management firms scattered all across the length and breadth of the country and they are responsible for employing about 196,411 employees.
The industry rakes in a whooping sum of $233 billion annually with an annual growth rate projected at 3.3 percent within 2011 and 2016. It is important to state that no organization can boast of having a dominant share of the available market.
A report recently published by IBISWorld shows that the investment portfolio management services industry operates with a low level of capital intensity. The report also estimates that for every $1.00 spent on wages, the industry will allocate $0.06 to capital investment; this 2016 figure represents a small decline from capital intensity in 2011.
Capital-intensive IT functions such as trading and asset services, are largely outsourced to securities brokers and custodian banks. IT outsourcing to these third parties has allowed the industry to transition from a fixed to a variable cost structure which enables industry players to keep profit margins high. As a result, the industry is considered to be labor intensive, with wages accounting for an estimated 30.9 percent of total industry revenue in 2016.
The investment portfolio management services industry will continue to blossom because corporate organizations, accredited investors, business men and women, households and international business community et al will not relent in ensuring that their investment portfolio is well – managed.
Starting an investment portfolio management firm requires professionalism and a good grasp of how investment works on a global platform. Besides, you would need to get the required certifications and license and also meet the standard capitalization for such business before you can be allowed to start an investment portfolio management firm in the United States; the industry is heavily regulated to guide against fraud and criminality.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of an investment portfolio management firm is not restricted to people and corporate organizations in your immediate community or state, but it cuts across people and corporate organizations from all over the world. This is so because investment portfolio management is a worldwide platform hence the ability to work for people and corporate organization all across the globe.
So, if you are looking towards defining the demographics of your investment portfolio management firm, then you should make it all encompassing. It should include business oriented people, investors and corporate organizations within and outside the United States.
3. Decide Which Niche to Concentrate On
Most investment portfolio management firms tend to provide a wide range of investment portfolio management services which include investment and broker-dealer trading services, banking and wealth management services and engaging in proprietary trading (trading their own capital for profit) to varying degrees, that is why it seems that there are no niche areas in the industry.
But on the other hand, some investment portfolio management firms may decide to major in some key areas such as;
- Large-cap equity, government fixed income and structured products
- Equity specialties and fixed income products
- ETFs and passively-managed products
- Alternatives asset management
- Solutions Products and Others (target date products and LDIs)
The Level of Competition in the Industry
The level of competition in the investment portfolio management services industry does not in any way depend on the location of the business since most investment portfolio management firms can operate from any part of the world and still effectively compete in the investment portfolio management services industry.
When it comes to investment portfolio management services, distance is never a barrier when competing for clients, especially international clients. What most clients want is result, hence they are ready to hire the services of an investment portfolio manager no matter the part of the world they operate from as long as they have good track records and can deliver excellent results when it comes to giving them good returns on their investments and managing their wealth portfolio amongst other services.
But over and above, there are several investment portfolio management firms, investment banks and investment cum financial consultants scattered all around the United States and in the cyber space. So, if you choose to start your own investment portfolio management firm in the United States, you will definitely meet stiff competition not only amongst investment portfolio management firms and investment banks in the United States, but also all over the globe especially if you specialize in working for international business men and women and corporate organizations.
4. Know Your Major Competitors in the Industry
In every industry, there are always brands that perform better or are better regarded by customers and the general public than others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading investment portfolio management firms in the United States of America and also in the globe;
- BlackRock (United States)
- UBS Global Asset Management (Switzerland)
- Allianz Asset Management (Germany)
- The Vanguard Group (United States)
- State Street Global Advisors (United States)
- PIMCO (United States)
- Fidelity Investments (United States)
- AXA (France)
- P. Morgan Asset Management (United States)
- Credit Suisse Asset Management (Switzerland)
- Chevy Chase Trust Company
- Hightower Advisors, LLC
- Oxford Financial Group, LTD
- Comprehensive Financial Management, LLC
- AT Investment Advisers, Inc.
- Plante Moran Financial Advisors
- Brownson, Rehmus & Foxworth, Inc.
- Innovest Portfolio Solutions, LLC
- Convergent Wealth Advisors, LLC
- KLS Professional Advisors Group, LLC
When it comes to starting an investment portfolio management firm, you just have to get your feasibility studies and market research right before venturing into the business. It is good to mention that investment portfolio management firm business is not for rookies; it is for professionals who have successfully cut their teeth in the financial consulting and related industry over the years.
You will be expected to hire experts that will help you with comprehensive economic analysis and the profitability of the businesses within the location that you intend launching the business. If you get your economic and cost analysis right before launching the business, you may not have to stay the long before you breakeven.
5. Decide Whether to Buy a Franchise or Start from Scratch
When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful investment portfolio management firm as against starting from the scratch. Even though it is expensive to buy the franchise of an investment portfolio management firm, but it will definitely pay you in the long run.
But if you truly want to build your own brand after you must have proved your worth in the investment portfolio management services industry, then you might just want to start your own investment portfolio management firm from the scratch.
The truth is that it will pay you in the long run to start your investment portfolio management firm from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
Please note that most of the big and successful investment portfolio management firms around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
If you decide to start your own investment portfolio management firm today, one of the major challenges you are likely going to face is the presence of well – established investment portfolio management firms, investment banking and securities dealing firms and also other related financial consultants who are offering same services that you intend offering. The only way to avoid this challenge is to create your own market.
Other threats that you are likely going to face as an investment portfolio management firm operating in the United States are unfavorable government policies, the arrival of a competitor within your location of operation and global economic downturn which usually affects purchasing/spending power. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
- Best legal entity to use for this type of business
You have the option of either choosing a general partnership, or limited liability company which is commonly called an LLC for an investment portfolio management firm. As a matter of fact, if your intention is to grow the business and have clients both corporate and individual from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your investment portfolio management firm; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entity to use for your investment portfolio management firm, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your investment portfolio management firm so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
8. Choose a Catchy Business Name
Generally, when it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own investment portfolio management firm, here are some catchy names that you can choose from;
- Creeks Investment Portfolio Management Firm, LLC
- Golden Crown Investment Group, Inc.
- Ken Bonaventure & Associates Portfolio Managers, LLP
- Investment Solution Portfolio Management Firm, Inc.
- Lego Nick Investment Portfolio Management Firm, LLC
- Fleming Hills Investment Portfolio Management Group
- Nally Whyte Investment Portfolio Management Firm, LLC
- Phil Garry Investment Portfolio Management Firm, LLP
- Close Watch® Investment Portfolio Management Firm, LLP
- DMX Investment Portfolio Management Firm, Inc.
- Shannon Stevens Investment Portfolio Management Firm, Inc.
- Life Gate Investment Portfolio Management Firm, Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your investment portfolio management firm.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own investment portfolio management firm in the United States of America;
- General insurance
- Risk Insurance
- Credit insurance
- Deposit insurance
- Financial reinsurance
- Lenders mortgage insurance
- Health insurance
- Liability insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If you are considering starting your own investment portfolio management firm, usually you may not have any need to file for intellectual property protection/trademark. This is because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subject to the review of attorneys as required by USPTO.
11. Get the Necessary Professional Certification
Aside from the results you produce as it relates to return on investment (ROI), professional certification is one of the main reasons why most investment portfolio management firm and financial consultants stand out. If you want to make an impactin the investment banking and securities dealing services industry, you should work towards acquiring all the needed certifications in your area of specialization.
You are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own investment portfolio management firm;
- CPM Certified Chartered Portfolio Manager AFA Accredited/The Certified Portfolio Manager (CPM®)
- MoP® Certification – Management of Portfolios
- The CISI Diploma in Investment Compliance
- The Program & Portfolio Management Certification (PPMC)®
Please note that the higher your qualifications and experience (expertise), the easier it is for you to secure high profile investment and wealth management deals from corporate clients.
12. Get the Necessary Legal Documents You Need to Operate
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized especially for a business like investment portfolio management firm. It is a fact that you cannot successfully run any business in the United States without the proper documentations.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own investment portfolio management firm in the United States of America;
- Certificate of Incorporation
- Business License and Certification
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- Company Bylaws
- Insurance Policy
- Memorandum of Understanding (MoU)
13. Raise the Needed Startup Capital
Asides from the required capitalization and pooling of funds from your clients to invest with, starting an investment banking and securities dealing services firm can be cost effective. Securing a standard office in a good business district, equipping the office and paying your employees are part of what will consume a large chunk of your start – up capital.
No doubt when it comes to financing a business, one of the major factors that you should consider is to write a good business plan. If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your investment portfolio management firm;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
14. Choose a Suitable Location for your Business
Investment portfolio management firm and most financial service based type of businesses require that you see physically with your clients hence it must be located in good location; a location that is prone to both human and vehicular traffic, and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profits from the business.
The fact that you can operate your investment portfolio management firm from any part of the world does not mean that location has little influence on the success of an investment portfolio management firm. If you have taken your time to study the investment portfolio management services industry, you will realize that investment portfolio management firms and financial consultancy agencies are willing to pay expensive rents in order to stay in a busy business district; a place where business and financial activities are at its peak.
Most importantly, before choosing a location for your investment portfolio management firm, ensure that you first conduct thorough feasibility studies and market survey. The possibility of you coming across a similar business that just closed shop in the location you want to open yours can’t be ruled out.
These are some of the key factors that you should consider before choosing a location for your investment portfolio management firm;
- The demography of the location as it relates to the number of investors and potential investors
- The demand for the services of investment portfolio management firm related businesses in the location
- The purchasing power of residents of the location
- Accessibility of the location
- The number of investment portfolio management firms and related services in the location
- The local laws and regulations in the community/state
- Traffic, parking and security
15. Hire Employees for your Technical and Manpower Needs
On the average, there is no special technology or equipment needed to run this type of business except for customized investment portfolio management software, social media management software applications and other financial related software apps. You will also need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).
When it comes to choosing between renting and leasing an office space, the size of the investment portfolio management firm you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard investment portfolio management firm, then you should consider the option of leasing a facility for your office.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Fund Manager/Portfolio Manager, Risk Manager, Chief Financial Officer (CFO)/Chief Accounting Officer (CAO), Business Development Executive/marketing Executive, Customer Service Officer or Front Desk Officer and Accountant.
So, you would need a minimum of 5 to 10 key staff to effectively run a medium scale but standard investment portfolio management firm. Please note that there will be times when you are expected to go out of your way to hire experts to help you handle some high – profile financial consultancy contracts especially from big corporations.
If you are just starting out, you may not have the financial capacity or required business structure to retain all the professionals that are expected to work with you which is why you should make plans to partner with other financial consultants/experts that operate as freelancers.
The Service Delivery Process of the Business
The way an investment portfolio management firm works varies from one agency to another, but ideally, an investment portfolio management firm is expected to first and foremost build a robust company profile before biding for investment portfolio management contracts from corporate organizations, it will give them an edge over their competitors.
Most investment portfolio management firms get funding from investors who are interested in investing, and they assist them in investing their funds over a period of time as agreed by both parties and also managing their investment portfolio.
Despite the fact that investment portfolio management service is highly risky, it is still a profitable venture hence there is an agreement between the investment portfolio management firm and the client as it relates to the commission they are expected to make from the deal. Most investment portfolio management firms charge based on percentage, and also fix consultancy/business administrative fees.
It is important to state that an investment portfolio management firm may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI) efficiency and flexibility; the above stated business cum services process is not cast on stone.
16. Write a Marketing Plan Packed with ideas & Strategies
- Marketing ideas and Strategies
As an investment portfolio management firm, you would have to prove your worth over and over again before attracting business deals from corporate clients. So, if you have plans to start your own investment portfolio management firm, it will pay you to build first build a successful career in the investment portfolio management services industry.
People and organizations will hire your services to help them handle all their investments and wealth management portfolios if they know that they are going to get good returns on their investment.
So, when you are drafting your marketing plans and strategies for your investment portfolio management firm, make sure to create a compelling personal and company profile. Asides from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to investment portfolio management and the organizations you have worked for. This will help boost your chances in the market place when sourcing for clients/investors.
Please note that in most cases, when you are marketing your services to corporate organizations, you will be called upon to defend your proposal, so you must be pretty good with presentations. Here are some of the platforms you can utilize to market your investment portfolio management firm;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, accredited investors, business men and women, entrepreneurs, households and international business community in the United States
- Advertise your business in relevant financial magazines, radio and TV stations (make yourself available for investment portfolio management services related talk shows and interactive sessions on TV and Radio)
- List your business on local directories/yellow pages
- Attend international financial cum investment expos, seminars, and business fairs et al
- Create different packages for different category of clients in order to work with their budgets
- Leverage on the internet to promote your business
- Join local chambers of commerce and industries around you with the aim of networking and marketing your services; you are likely going to get referrals from such networks
- Engage the services of marketing executives and business developers to carry out direct marketing
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If your intention of starting an investment portfolio management firm is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on the promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brands, besides it is pretty much effective and wide reaching.
Another strategy is to sponsor relevant community based programs, TV and radio programs, advertise your business in relevant magazines and newspapers. Below are the platforms you can leverage on to boost your brand and to promote and advertise your business;
- Place adverts on financial magazines and related newspapers, radio and TV stations
- Encourage the use of word of mouth publicity from your loyal customers
- Leverage on the internet and social media platforms like; YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat, Badoo, Google+ and other platforms to promote your business
- Ensure that you position your banners and billboards in strategic positions all around your city
- Distribute your fliers and handbills in target areas in and around our neighborhood
- Contact corporate organizations, accredited investors, business men and women, households and international business community et al by calling them up and informing them of your organization and the investment banking and securities dealing services you offer
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site
- Brand all your official cars and ensure that all your staff members and management staff wear your branded shirt or cap at regular intervals
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