Guest Post: Starting an Investment Club Sucks (But is Totally Worth it)

By: Sean Sirianni of Sneaky Falcon Enterprises, LLC

If you are reading this you are either:

A. Currently a member of an investment club,
B. Interested in starting an investment club,
C. Friends or Family of someone that works at Voleo, OR
D. A poor typist and very confused Viola player looking for myviola.com

I myself stumbled across Voleo recently as someone in “Bucket A”. Just a few years ago however, I was squarely in “Bucket B” and my investment club was but a glimmer in my mind’s eye. I can say with all honesty (and full bluntness) that starting an investment club sucked.

Let me take a few steps back. My name is Sean Sirianni, and I’m the CFO of Sneaky Falcon Enterprises, LLC. Yes, that is our actual business name, and no, we aren’t involved in some sort of underground falcon fighting league. We are a legitimate, 10 member investment club that has pooled our money together to learn and invest in the stock market.

Sneaky Falcon

We have been actively meeting and investing since December of 2015, and recently launched our own website to share our investment club journey with the internet. That is how we got connected with the Voleo product and team, and why I got invited to guest post here on their blog.

So why on a blog supporting a product that is dedicated to helping people come together to form investment clubs and jointly invest would I have the audacity to say that starting an investment club sucks? Because the firsthand experience I had starting an investment club before Voleo sucked! While it was certainly rewarding and I couldn’t be happier with the end result, it was tedious and time consuming to say the least.

Rewind back to late 2014 (over a year before our first investment was made) and you would find me and my colleagues Chris and Jordan discussing the idea of starting an investment club. We had shared the notion with some other friends before, and decided it was time to move forward.

We scoured the internet for help and met weekly to work on our proposal. Then, we finally cobbled together a long winded but elegantly worded partnership agreement and club charter (Jordan studied English in college). Over the next few months, we presented the idea to friends we thought may be interested, hashed through the finer points of our agreement, and in May of 2015 we legally formed our LLC.

Then began the process of finding a brokerage, failing to get a bank account, and starting operations. Partly because we were dispersed across the US, partly because we were all busy with full time jobs, and partly because it is just a tedious process, we were not ready to pick our first stock for another 7 months.

All-in-all, from serious inception of the idea to buying our first stock, it took almost 13 months to get our investment club started. It is amazing that everyone waited around that long to see it through. Realistically, we probably could have cut that time in half, but still!

So what hurdles made starting an investment club so difficult? Where to begin…

Lack of Resources

Maybe this should more accurately say lack of modern resources. There are plenty of great books out there on the subject of investment clubs (that your dad probably read when he was starting his investment club back in 1984).  There are also websites dedicated to clubs, like Better Investing, but let’s face it: There hasn’t been a whole lot of innovation going on in the investment club world in the last 25 years.

Unfortunately, it makes sense. As discussed on this site and elsewhere, many Millennials haven’t been all that eager to invest in the stock market, and it hasn’t really been until recently that fintech startups have arisen to tackle that problem.

While there is plenty to learn from older books and articles, they are a bit out of touch with modern technology and today’s markets. Having a resource that provides a 2017 perspective on starting an investment club is invaluable.

Paperwork on Paperwork

When forming any business, including starting an investment club, there is bound to be paperwork. Although it may be a hassle, it is incredibly important. These documents provide a legal foundation for the club, govern its activities, and protect the group and its members.
Everyone is friends until money gets involved; good documentation can keep it that way if there is ever a disagreement.

We started with a template we found and muddled our way through from there. None of us are lawyers, so it involved a lot of self-directed learning. Not to mention trying to gather signatures and find a safe place to store our legal documents. We made a lot of assumptions and had little real guidance through the process.

Finding a Brokerage (aka More Paperwork)

Getting a brokerage, a fundamental tool needed to run your investment club, (spoiler alert) also kinda sucked.

There are plenty of options when it comes to discount brokerages, and the tools and customer service provided are all now pretty great across the board. That being said, opening an account for an investment club throws all kinds of wrenches into an otherwise easy process.
You will need a special application (if your desired brokerage even supports investment club accounts), and will also have to provide all of the paperwork you just created in hopes of getting approval. Formal written consent from members of the club is required to make any changes to the account. Are you trying to add or remove a member? Time to refile more paperwork!

Also, until Voleo only a few people could be named on the account, putting responsibility for managing the account and making trades directly on their shoulders. Sure, you could share your credentials with the entire group, but that opens the door to members making trades without the rest of the group knowing.  And good luck managing a web of Venmo or PayPal transactions to collect money from everyone.

All-in-all, it feels unnecessarily complicated and there is a lot more red tape, arguably for the protection of everyone involved. Still, it was another barrier to getting things started before Voleo automated everything.

Running an Investment Club

Once you get to the point of actually starting your new club, then begins the joy of managing it. As mentioned earlier, it’s a real business you have on your hands now, and along with that comes fun things like accounting and taxes.

Once again, the options for tackling this were limited. There are a few subscription-based services that handle accounting, member performance reporting, and generating tax forms for a fee.  We opted to build a completely custom Excel tool which took a lot of time and effort to create, and additional ongoing work to update monthly. Being the financial nerd that I am, I saw it as a challenge, but I could understand why other people might see it simply as a burden.

Furthermore, you needed to manage meetings, propose investments, track votes, and execute on approved trades.  Needless to say, starting and running a successful investment club in the traditional way can be a lot of work.

When are you getting to the “But it’s Totally Worth it” part?

If I’ve completely scared you off from starting an investment club, let me try to fix that. I dealt with the issues and complexities of starting our investment club back in 2015 without modern resources, but looking back a few years later, I can still wholeheartedly say it has been worth it for us.

Sneaky Falcon has brought a group of friends scattered across the country back together every other week or so to get on Skype and discuss investing ideas. We have a running group text where we share thoughts, important news, and memes in between meetings.

We have a lot of fun with it, and we are learning and growing our portfolio at the same time. The team has a varied educational background, and work in diverse industries ranging from healthcare to manufacturing to government services. We have been able to bring that broad set of experiences to the table to share different viewpoints and grow as a team.

If I could do it all again, I wouldn’t change anything about the end result (except maybe some of the poor choices of stocks we’ve made.)

How Voleo Can Help

As I was writing this up, the working title for this post was “Where the F@%# was Voleo 3 Years ago?!” but I ended up renaming it. “Where the F@%# was Voleo 3 Years ago?!” - @Sneaky_Falcon guest post Click To Tweet

Seriously though, where were you Voleo?

I have only begun to explore all the features but I can clearly see that Sneaky Falcon could have gotten started in a matter of days and not 13 months with the help of Voleo’s app.

From generating a partnership agreement, to getting a brokerage, to managing stock picks and votes, to even helping you with taxes, it seems like Voleo has got you covered. Not to mention they are building up a relevant knowledge base for clubs through their blog, and it’s all mobile-first.

Literally at every point in our journey to get started when I paused and thought “Man this sucks, I wish I had a tool for that”, Voleo could have been the “tool for that”.

A huge thank you to Thomas and the Voleo team for letting me come over here and whine about how kids these days have it so easy with their fancy new investment club apps. Hopefully tools like Voleo and others help my fellow Millennials get over that hurdle to start learning more about investing. The Sneaky Falcon team thinks the time for an investing revolution is now, and we are proud to be a part of it along with Voleo.

Lastly, if you would like to peer deeper into the inner working an actual (albeit mediocre) investment club, you can find us on the twitter (@sneaky_falcon) or visit our website, www.sneakyfalcon.com

Cheers!
Sean

 

Ready to save yourselves the agony and get started in hours rather than months?  US residents can grab the apps here.

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