What do you need to start your own investment company?
After trading the financial market for a while, you may feel like you’re well placed to start a business in the field. And quite rightly so. You could gather a team of traders like you and then invite people to come and invest their money so that you can trade for them.
Or you don’t even have to be a financial trader in the first place. You may be an investor or a simple financial enthusiast – someone with a knack for anything investment-related.
Whatever the case may be, the fact remains you’re motivated to start an investment company – somewhere people can come to trade, invest, and multiply their funds.
Truly, it’s a good niche to explore.
But how do you start? What are the things you need? Are you well-placed to start right away? All these, among others, are things you’ll learn here today.
How to start an investment company
- Choose a name
The first step in the process is name selection. You have to pick a name for the business, and it has to be something that convinces potential investors to invest their money.
Usually, people go with names with the keyword ‘investment’ in them, but that’s not a MUST. You can have an investment company that doesn’t have ‘invest’ or ‘investment’ in it.
J.P. Morgan is an investment company that doesn’t scream investment from the long way out. Of course, it would be better to choose a name that reflects what you do at a glance.
2. Create a business plan
Every new business requires planning. You need to carve out a plan to approach every aspect of your business from the get-go.
- Which types of investors will you be going after? Business owners, Rich folks, students, salary earners, oldies, retirees, or what?
- What are your immediate short, medium, and long-term goals?
- Where would your business be staged Online or offline, or both?
- What are the certifications/registrations you’ll need, and how will you get them? For example, all investment companies must get an LEI Application nowadays. LEI code is a unique global identifier for legal entities participating in financial transactions.
3. Get your business website
Even if you’re running the business offline, you still need a space on the internet. This is where you’ll spell out everything your business does, as well as make yourself accessible for people that are not within your jurisdiction.
Furthermore, having a business website helps you target a different kind of audience, most especially people that would not have otherwise known you existed.
Finally, having a business website makes it easy for clients to reach and do business with you. For instance, a client could discover about you on Facebook and then visit your site to learn more, make an investment, and monitor the growth.
4. Incorporate your company
The first step of the legal process is business incorporation. You need to contact the office of the secretary of state for your state to obtain the application you need.
Business incorporation has to do with registering your business as a limited company. This stage of the process is essential because you want the business to be identified differently from who owns or runs it.
In the case of debt or losses, the business owners will not be liable.
5. Register your company locally
One of the most important business registrations for investment companies these days is the LEI registration. However, old-fashioned registration systems like state registration is still a thing.
Depending on the state where you’re staging the business, you will need to apply with the office of your secretary of state. Usually, this application involves the payment of a fee and writing and submitting the articles of incorporation for the investment company.
6. Register your company internationally
After registering with the state, you need to also register internationally. International registration puts you up there with the rest of the industry.
Basically, there are many organizations you can register your investment company, depending on the kinds of investments you’re servicing. For instance, there are organizations governing stock investment groups, mutual funds, Foreign exchange, and cryptocurrency.
Besides investment-specific registrations, all investment companies require other kinds of international registrations. One such registration is the Legal Entity Identifier registration. Popularly known as LEI application, this registration makes your investment company reputable and trustworthy internationally.
In short, LEI code helps your financial institution earn recognition and acceptance on a global scale.
7. Register with the SEC
Yes, I know, I know, I know… register here, register there… it’s getting tiring already.
Don’t be discouraged; that’s what it takes to start an investment company. You’ll be handling people’s funds, remember? Therefore, you need to be vetted by the right bodies to show that you can be trusted.
In this case, the SEC registration is another one you must apply for.
Popularly known as the Securities and Exchange Commission (SEC), SEC is the body responsible for overseeing and controlling all things investment-related. An SEC registration lets you legally accept investment funds from clients, issue receipts, trade financial assets, transact with other financial groups, and hold funds.
8. Register with the IARD
Another important registration you can’t ignore is the Investment Advisor Registration Depository (IARD).
Developed by NASAA and the SEC and operated by FINRA (the Financial Industry Regulatory Authority), this registration can be likened to the CRD registration for broker-dealers
It is an electronic system that allows investors to research most investment companies’ employment and disciplinary histories.
9. Start marketing your business
After all these registrations, you’re ready to get started. But before you do that, you’ll need to first get the word out about your business. And that’s where marketing comes in.
Usually, you can get a ton of material packets and materials from the funds and investment companies you will be representing. Since you’ll be promoting their products and services to clients, it’s just logical that you’ll be getting marketing materials from them.
Additionally, you’ll need to create your own marketing materials to promote your business. This can include social media ads, brochures, newsletters, website ads, and sales copies, business cards, and other marketing pieces.