A couple questions to veteran clubs
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A couple questions to veteran clubs Hello all, Kind of new to the scene with investing as a club, I have a few ?'s if anyone can help. -If a member decides to quit the club what is the best way to "cash out" that individual? - Do other groups find it the easiest to have members contribute once a month as opposed to every three (quarterly)? -How do clubs deal with late contributions from members? Do you assign their "valuation date" on the day they pay? Thanks for reading. In a message dated 04/17/09 22:48:08 Eastern Daylight Time, podonnell1@bivio.com writes:
The best way is to transfer appreciated stock. The remaining members of the club get to defer their share of the unrealized gain until the date in the future when each of them withdraws from the club and the member receiving the stock gets a cost basis in the shares received that is equal to his cost basis in the club. In other words, he defers any capital gains on withdrawal until he sells the shares.
Most clubs make monthly deposits, but there are clubs that contribute more or less frequently than that. Whatever works for your club is best for you.
Speaking only for my club, if the contribution isn't received by the date of the meeting (or by the time the other contributions are deposited to the club's account) then the contribution is recorded at the next meeting using the valuation appropriate for that meeting. There are other ways of dealing with late payments, but the one I would argue strongly against is allowing ALL late payments to receive the valuation they would have received had they been timely.
Ira Smilovitz
>- Do other groups find it the easiest to have members > contribute once a month as opposed to every three > (quarterly)? I think "easiest" is kind of a subjective term. It is probably a little easier for the treasurer if everyone pays less frequently. I think the best setup is one where members are making automated payments from their banks to your brokerage account on a regular basis. If it's automated, you won't have to chase down checks. Members can set up payments to arrive on a date you pick. The main objective is for your club to be able to count on a certain amount of money coming in on a regular frequency so you know what you have to invest. >-How do clubs deal with late contributions from members? Do >you assign their "valuation date" on the day they pay? We would recommend that you record member payments as they are received and use the transaction date as the valuation date. If members consistently make late payments, it may be an indicator that they are not committed to participating fully in your club. That is probably best addressed on it's own terms. Policing and penalizing are not really activities that a healthy club should be having to deal with and they probably won't produce the desired results anyway. Laurie Frederiksen bivio Inc. I would recommend that you pick a valuation date. In the first year of our club we had the valuation date as the transaction date. All of our members mail in their checks before each meeting (we are an online club). Therefore, we had different valuations for those who contributed the exact same amount of money depending on the market the day it was deposited. Some people were even trying to time the market to try to get more for their money. To be fair, we changed to a valuation date on the 1st day of the month. Members have until we meet on the third Friday of each month to get their checks in. And everyone's valuation is based on the same amount. John Rice ABODI Investment Club -------------------------------------------------- From: "Laurie Frederiksen" <laurie@bivio.com> Sent: Friday, April 17, 2009 8:40 PM To: "'The Club Cafe'" <club_cafe@bivio.com> Subject: RE: club_cafe: A couple questions to veteran clubs >>- Do other groups find it the easiest to have members >> contribute once a month as opposed to every three >> (quarterly)? > > I think "easiest" is kind of a subjective term. It is probably a little > easier for the treasurer if > everyone pays less frequently. I think the best setup is one where > members are making automated > payments from their banks to your brokerage account on a regular basis. > If it's automated, you > won't have to chase down checks. Members can set up payments to arrive on > a date you pick. The > main objective is for your club to be able to count on a certain amount of > money coming in on a > regular frequency so you know what you have to invest. > >>-How do clubs deal with late contributions from members? Do >>you assign their "valuation date" on the day they pay? > > We would recommend that you record member payments as they are received > and use the transaction date > as the valuation date. If members consistently make late payments, it > may be an indicator that > they are not committed to participating fully in your club. That is > probably best addressed on it's > own terms. Policing and penalizing are not really activities that a > healthy club should be having > to deal with and they probably won't produce the desired results anyway. > > Laurie Frederiksen > bivio Inc. > > > > Hi Patrick,
The best way to cash out any member is with stock. Most discount brokers allow the member to set up an account without funding it. Your broker (if different from theirs) will probably assess a small fee to electronically transfer the shares from one account to the other. This fee should be passed on to the departing member, PROVIDED it's established in your bylaws. If you don't have something established, I highly recommend that you ask people here for theirs, and borrow what makes sense for your situation. You can find our buyout clause in our Partnership Agreement at www.bivio.com/crowriver under Club Documents on the homepage. If you have questions, you can send them here, or to me personally. If you send them here, you will get other posters' opinions on those same questions. And I might add that bivio's program handles these stock/cash transactions in a very simple manner. You don't have to do the math.
Whether your members pay monthly or quarterly (some older clubs pay annually), or whether they write a check or have the money withdrawn from their account is all based on your club's desires and needs. But to have the money electronically withdrawn solely because they can't be bothered to pay in a timely manner is, to me, just plain dumb. Make sure you do it for the right reasons.
I feel the same way about penalties. We are all adults, and I don't believe in policing this issue. In my club, we don't have problems with late payments or attendance. If you don't show up and pay, you won't be in the club very long. Sure, we have members who fall ill on the day of the meeting or get a flat tire on the way. But not on a regular basis! We are a working model club and we have a defined purpose. Everyone knows what that is. They understand it. Many clubs make the mistake of setting the tone, right from the git go, of being a social club. They are the ones that usually run into this problem.
The late fee sends the message that there is, in fact, an alternative to paying on time. So if you insist on a fee, make it count, like double the dues. And if I can depart any wisdom from my 16 years of clubbing experience, it would be this: What is good for one member will be good for another. If one member gets away with paying late, irregular attendance, coming ill-prepared, etc., it will grow like a cancer through the entire club. You have to establish some clear boundries, as a group, before they become a problem. Of suffer consequences later.
It may seem harsh, but if you can get your collective to agree on some basic tenents for your club, I promise it will run more smoothly. And by setting these rules together, before they occur, you will get their support since they actually have a say in developing those boundries.
Good luck to you!
Crow River Investment Club
www.bivio.com/crowriver
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