I am putting together an investors group, and have done much of the legwork in regards to reaserch, contracts, etc, has anyone had experience with creating an investment group that can provide and pointers to potential pitfalls I might have overlooked, please?
The first thing to remember is that you are dealing with a group of people. With people come opinions, requirements and generally differing reasons for investing.
Beware of any Financial Services Reform Act legislation when considering these sort of things – as the promoter you may well be seen to be giving advice – to do this you need to be approprately licensed, insured and follow industry advice requirements.
If the goup is for property investing you need to consider whether you may need to be a licensed real estate entity as if can be considered the provision of property investment advice.
How are you arranging the investments – via joint holdings or a trust structure?
How do you avoid group members being pressured by on another?
If one wants out how do you deal with that?
Is there a buyback/buyout offer?
Have you determined the investment goals and objectives – income what level, capital growth – what rate. Is it long term investing or speculating.
How do you vote on investment decisions.
Who manages the money – is there enough audit processes to stop fraud?
Does the arranger require any Professional Indemnity or Officebearer insurance?
These things usually work one of two ways – great – or horrible – not much in between.
All I can say is be wary.
In the current issue of Smart Investor magazine there is a feature article about setting up an investment club so you might want to have a look at that.
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