How to Start an Investment Advisory Business from a Nontraditional Background


How to Start an Investment Advisory Business from a Nontraditional Background by David Merkel, CFA of The Aleph Blog

Another letter from a reader:


I recently discovered your blog. I read that you have had quite a long history in the financial industry and you mentioned to be running your own asset management shop as well. I currently work as a software developer but I have had for a long time a strong passion for investing and lately I have combined both of the latter. During the last 2 years I have developed my own software for simulating all sorts of quantitative investment strategies mainly for myself but at times for clients too. However, currently I am in a situation where I would like to take my hobby and passion to the next step and start working in the financial industry as a programmer doing similar tasks as I have done now as a hobby. Would you happen to have any good advice how to move forward and where to start looking for this kind of a position?

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Thanks in advance,

You have to make your expertise known.  That can be through a blog, a newsletter (whether e-mail or paper), and must give people a taste of your expertise.  Be aware that to gain reader interest, clever examples will suffice.  To gain clients you will need a track record that shows the results of all decisions made  over the non-discretionary accounts you advised.

Simulated results aren’t enough.  You have to be able to show that you made actual money in real time.  Once you can do that, make your expertise known, and then follow up with those who contact you.

Many clever investors have come from nontraditional backgrounds.  I know more than a few.  I will add only this: don’t quit your “day job” before you have a sense that your investment management firm will have traction.



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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

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