Mar 31, 2016 | News

The Value of Strategic Partnerships – Maximize Your Rate of Returns

Whether you are running a hedge fund, Introducing Broker, CTA, or CPO you are required to spend most of your time managing your investors, investments, and returns.  In our regulated industry, you also need to hire an attorney, an auditor, a compliance expert, and an administrator that compiles your monthly performance results.  These hires can be considered necessary evils.  But if you hire the right team, you can extract more value to drive efficiency and reduce your business risk so you can focus more time on working with you investors, managing investments, and more importantly, making money.

I have been in this industry for over 30 years.  I started with the NFA when self-regulation was the start of an idea.  As a NFA compliance auditor and as a futures industry compliance guru I have come across a number of success stories.  The successful CTAs, IBs, and CPOs figured it out.  They leveraged strategic partnerships with their typical service providers (attorneys, accountants, auditors) as well as with other industry professionals such as FCMs, conference providers, and marketing firms.  Success in this industry is a team sport.  It is based on relationship building.  When all the service providers you hire work together, it enhances your chances for success because it allows you more time to concentrate on what makes you money which is positive rates of returns.

Size Matters

Select a service provider that services clients that are similar to the size of your firm.  Why does size matter?  If you are a $2 million fund or a CTA and the average client for that accounting firm is a $50 million fund or CTA, it is likely that your $2 million account will be put on the back burner and they will get to you when they have time.  This also holds true when you choose an industry conference that you want to attend.  Choose the ones that fit your asset base.  Don’t waste your money and time at the SALT Conference unless you are a $50 million player.  Others at the conference want to talk to $50 million funds, not small funds.  Build your team of players within your own league.  You can always switch leagues when you have more money under management but start with the players who can build your foundation.

Discounted Prices = Discounted Service

Some spend a great deal of time negotiating the lowest fees possible from their service providers. Unfortunately, discounted fees can result in discounted service.  This can result in wasted time and thus potentially leading to decreased rates of returns.  Keep your goal in mind which is to maximize your time to manage your investors, investments, and returns.  Usually by saving money with a discounted service provider you will spend time managing them or spending time managing the problems they created in financial reporting, tax preparation or lack of marketing.

Stay on the Right Side of the Fence Where the Grass is Greener

Hire an attorney, a compliance firm, and accounting firm that specializes in our industry.  I have come across a number of times where a new CTA or IB is using his Uncle Fred to do his accounting because he was way cheaper than a reliable accountant he came across at an industry conference.

The new CTA tells me that Fred knows a little bit about the NFA rules and had been an accountant for his dad’s trucking company for 20 years, and best of all he is 50% cheaper than an industry accountant.  This is a red flag.

Your operation just became more expensive in the long run because you will not have reliable reporting and your future NFA audit will cost you time and money to fix your compliance issues.  Highly regulated industries require highly knowledgeable service providers.  You are paying for years of experience and knowledge that will allow you to drive efficiency and focus on your goal to service your clients and avoid legal and regulatory issues.

In closing, ask for referrals, seek out industry educational conferences, marketing events, accountants, attorneys, auditors, and compliance gurus.  Ask questions to determine if the service provider is a good fit for your business and operations.  Spending time up front to find the right service providers will allow you to maximize your time in the long run.


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Michael Coglianese CPA P.C. specializes in serving the futures and securities industries (Funds, IBs, CTAs, CPOs, RIA, BD, and FCMs) for over 28 years, by providing auditing, tax, compliance, and registration services.  Our clients range from the newly seeded funds to the well-established, multi-million dollar funds.  Our firm is PCAOB and AICPA Certified Public Accountants.