I’ve gotten several people in my family interested in investing in ETFs, and so far I’ve put them on roboadvisors because they offer a really easy way to start. I’m not 100% happy with any of them (the roboadvisors, my family is OK), however, because of the fees and the fact that they seem to use more complicated baskets than the classic 3-4 ETF portfolios. That got me thinking about IB’s “Friends and
Family Advisors” account.
Is anybody using it? Is there some sort of legal/financial implication to this in Switzerland? I’m not a fan of paperwork or extra taxes, and I certainly wouldn’t want to be classed as a professional investor. I’m not sure if any of this would apply, though, given that the money would remain in other’s accounts and I would only be authorized to execute trades. Would this be an investment club according to the CISO law? Has anybody set this up?
First, Merry Christmas, in not so wintry Switzerland…
Yes, I have opended a friends & family account with IB, but my experience is limited to the United States. There, as long as I do not hold myself out as a financial adviser and keep the number of clients below 25 (or maybe it is 35) and the assets under management under $35m, you don´t need a license, even if you charge a fee to manage the money.
As far as Switzerland is concerned, I do not believe you need a license to manage money. You may need to join an SRO if you do it professionally. There is probably a deminimis excemption. I am sure that if you manage money for a handful of family members that you don´t need to register with an SRO. It would definitely not be an investment club, as the funds are not pooled. Each account holder has a separate account that they can access and trade in anytime. They can also delink the account from your friends & family masters account. All you have is a limited trading authorization. My suggestion is to sign up for the friends & family master account and then take on one family member and see how it goes.
Keep in mind the account minimum commissions apply to each client account (basically, they do have formulas to calculate).
My family members are investing a few hundred a month at most, so I didn’t put them on IBKR but rather chose a EU broker for them (for fee and tax reasons).
My family members are for the most part in the same situation, but it might still make sense for them to go with IB if they don’t have to deal with the complexities. In reality, my idea is to script something with the IB API to automate purchases and rebalances and set up my own mustachian roboadvisor. Now I’m just trying to find out how realistic this is.
I found https://regiswiss.ch/ but I can’t figure out where the threshold is where you suddenly become a client advisor. The law defines a financial service provider as
any person who provides financial services on a professional basis in Switzerland or for clients in Switzerland, while a professional basis is given in case of an independent economic activity for the purpose of permanent income;
So I guess I should be OK as long as I do it for free, although it would be nice to be able to recover server costs at least.
Honestly, in my opinion this would be way overcomplicating and overengineering things for the stated purpose. Especially in light of you starting this thread with being unhappy with other Robo advisors‘ portfolio „complicatedness“ of using more than 3-4 ETFs.
Manually rebalancing or adjusting every one or two years would probably not fare much better or worse. And IBKR already seeks to offer a client-side portfolio rebalancing tool.
PS: …unless, of course, you look at it as an interesting DIY / hobby project to tinker with and maybe learn a couple of things from (though remember, you‘d be playing with „live“ money)
The “hobby project” aspect is part of it, yes, I won’t lie.
But it’s also that I want to automate everything so I don’t have to log in every so often to buy new shares. If this was just for one-time bulk investments I probably wouldn’t bother, but if they’re going to be transferring money every month it’s going to get annoying pretty fast.
Anyway, the question was really about the F&F account, which I’d need regardless.
The topic became recently active in my family, and I really would like to help them, to build up some solide mustachian ETF portfolios. Of course it would be the best way to manage all of them with a “Family and Friends” account on IBKR, including my personal IBKR Pro account.
Since my parents and my brother are living in Eastern Europe (EU), and my sister in the UK, I’m hesitating where could I manage all the accounts with the minimal effort, hassle-free. After the Brexit regulations EU clients doesn’t have old IBKR Protection Scheme (500k USD invested amount), thinking to create accounts at Tastyworks for my family members, living in the EU.
I do not want to overcomplicate, but want to bump up this, to start into 2021 with family investing too.
Thanks for any hints and tipps.
Every country has differences, it’s likely what works well for us doesn’t really work there. E.g. in UK why not just put it in a target vanguard retirement fund? (would also have to do some research in the tax situation, etc. also depends if they’re tax domiciled vs. just tax resident)
I would be careful concerning the structure because if you’re the owner of the account you’ll need to pay the swiss wealth tax on the amount.
The Vanguard solution in the UK seems really good and easy to use.
Honestly, for a young person, it’s not so hard to manage an IBKR account and investing only in VT or EU version (just need to follow this How to buy the VT ETF (in USD) on Interactive Brokers). Sometimes, it’s better to teach than do it for others.
Hi guys,
For those who were looking the swiss regulation that is applicable for portfolio manager, please refer to FINMA’s website.
Exceptions to licensing requirements: There are exceptions to the portfolio manager licensing requirement. Persons acting as a portfolio manager do not need a licence, if they meet the following conditions:
They exclusively manage assets held by persons either in a business or familial relationship with them;
They exclusively manage assets assigned to employee participation plans;
They manage assets within a legally regulated mandate.
Portfolio managers do not need a licence if they do not work on a commercial basis. A portfolio’s operation is deemed commercial, if: it achieves gross income in excess of CHF 50,000 per calendar year; has business dealings with more than 20 contractual parties per calendar year, which are not restricted to one activity, or maintains at least 20 such relationships per calendar year; or has unlimited power of disposal over assets belonging to others that exceed CHF 5 million at any time.
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Now I’m just trying to find out how realistic this is.
