Trust management: a profitable service or a broker's headache

Trust management The most attractive for the private sector is the trader of ways to make money in financial markets. First, it does not require self-trading skills, which means that it is suitable even for beginners or people who have nothing to do with trading at all. Secondly, this way an investor can earn using experience and abilities of more professional participant of the market. And thirdly, transferring funds into management it is possible to receive profit without spending a single minute of one's time on trading. However, at the same time trust management The following are some of the most high-risk services on the financial markets, and brokerage firms often treat him with suspicion.

Is it possible to take advantage of all the benefits of asset management at the maximum risk of being cheated or ruined? Why brokers are prejudiced against the work of private managers and at the same time offer their own trust management services? How to distinguish a deliberately fraudulent scheme from the real working service? Let's talk about all this below.

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Trust management and private managers: investing at your own risk

As a rule, private managers are not bound by any formal restrictions, they can work with any assets, financial instruments and strategies. In essence, the manager simply gets access to your trading account and can use all the opportunities provided to you by the brokerage company. Accordingly, this type of investment assumes a higher rate of return than investments in ready-made investment products from a broker. In addition, you can promptly contact the manager, establish personal contact with him, and discuss all important moments for you.

Naturally, transferring your funds to another person is always a risk. Therefore, your relationship with the manager must be regulated in some way. In case you trust your word of honour and transfer your funds for management without a contract, no one can guarantee their safety. You should also understand that even the fact that the manager is employed by a bank, brokerage company or training center does not guarantee that the organization in question will be responsible for his actions. Therefore, it is likely that your contract for trust management will formally be an agreement between two private persons and in case of any claims you will have to go to a court of law.

Consequences of account management for the broker

Naturally, all the risks associated with trust management, investor The broker, in fact, should not make any difference who exactly manages the account. However, most brokerage companies in one form or another express their disapproval of this service or even expressly forbid the transfer of data for access to the trading account to any third parties.

There are several reasons for this:

• First, it violates the generally accepted principle of Know Your Client.

A trading account at a brokerage company is personalized - it is opened in the name of a particular client, and then the company requests scanned or notarized copies of documents certifying his identity and place of residence. This is done in order to know exactly who makes money on the financial markets and to prevent possible money laundering and terrorist financing activities. The actual work on the account of another person nullifies all efforts of the company to identify customers and, of course, can not be welcomed.

• Second, it creates unnecessary competition for the broker's own investment services

Brokerage companies usually offer clients the opportunity to invest in PAMM accounts or structured investment products, as well as trust management account as an official trader of the company and, of course, it is more profitable for the broker to promote his own services. The declared percent of profit at the broker is usually somewhat lower, but unlike a private manager, the company is more likely to completely fulfill its obligations under the contract. And in the case of serious losses it is easier to collect compensation from the organization than from a private person. Of course, all this is only valid if you work with a regulated company, a licensed broker. Cooperation with an offshore company in terms of security becomes no more profitable than hiring a private manager.

• Thirdly, it provokes additional difficulties and tensions in the relationship between the broker and his clients.

It is logical that it is useless to contact a broker with complaints about the work of a manager you attracted yourself. The company is not obliged to trace authorship or adequacy of transactions on this or that account. For the broker, logging in to the account with your username and password automatically confirms that it is you who is trading. However, more often than not, investors who have lost money and are desperate to get compensation from the manager use the company as the last opportunity to restore the status quo: they send a request to the broker to return the initial deposit due to incompetent or fraudulent actions of the manager. In this case, a reasonable and understandable refusal of the broker to pay for someone else's negligence causes dissatisfaction of the client and a wave of negative reviews on the Internet.

The axiom of safe investing

Before transferring your trading account to the trust management on or invest in an investment product:

• Soberly assess the percentage of return declared by the company or manager and do not let the promised "golden mountains" overshadow your common sense. Any, even the most experienced trader - be it a private professional or a broker's representative works in the market and cannot in 100% cases earn fabulous profits.
• Ask about the manager's reputation in the professional community. You should be alert both to negative reviews and to the absence of any information about him: articles, blogs, posts on forums and other materials that allow you to judge its competence. Also carefully examine the reviews of investment services of the brokerage company and pay attention to the statistics of the profitability of accounts and investment products.
• Make sure that the manager or company offers investors an adequate contract, which spells out the rights and obligations of the parties and the maximum amount of drawdown on the account.
• If you choose the services of a private manager, be sure to inform your broker that a third party is conducting transactions on the account. Then the company will have formal grounds to monitor more closely the operations on the account and promptly block it at your request or in the case of suspicious activity of the manager.

In deciding to donate funds to the trust management In the financial markets, the two world-renowned principles of "free cheese comes in a mousetrap" and "trust, but verify" should be taken into account. Remember that in the financial markets overinflated promises are practically synonymous with fraud, and do not leave your trading account and transactions on it unattended. Only in this case you will be able to fully feel all the benefits of earning from someone else's experience and with a high degree of probability receive a positive experience of cooperation, both with a private manager and with a brokerage company.