Hi, What % in fee sharing should I give to my asset raisers? I know the industry standard is about 20%. However, would it fair to step stair it, like 10% for the first 1MM and then 20% thereafter. Or should I set up a minimum, that the asset raiser will have to raise $2MM before the fee sharing kicks in? Thanks
You can do anything you want, but my experience says that they need incentive to do their best work for you. The standard is 20% for primes and other intro services. I would recommend against setting a minimum hurdle for the fundraisers. They really start working once they start getting paid. A better deal would be 10% for the first $1MM, 15% up to $5MM, and 20% after that. I keep it more simple than that. If they don't have the connections to raise at least $5MM with my track record, then I don't want to bother with them. They start @ 20% and remain there. But they only get paid on direct introduction. IOW, if one of their clients refers a friend. They don't get paid on that account.
In the long run, more important than the percent paid is the term of the payments (are you paying as long as the client is invested -- possibly decades -- or for a fixed time?), the scope of introductions that qualify for credit (can the asset raiser come at you years later with "I once called that guy about you..."?), and how long (if at all) the relationship is exclusive. The worst case scenario is an asset raiser who makes 100 phone calls to the usual suspects on day-1 as a pee-on-the-tree maneuver, then wants credit forever for any business you ever do with any of them. Basically he wants a free call option on your future success. Usually that option "expires worthless" but every now and then he'll cash in when a fund grows to billions.
For my company it is pretty simple. 1) An AP never has an exclusive relationship with me. They are never prevented from working with another company, and I'm not prohibited from using other APs. 2) They get 20% of proceeds from that client as long as that client remains with my company. If any client leaves for at least one year and then returns, the AP has no claim on them. 3) They must close the deal, not just make first contact. This is pretty standard. If my real estate agent finds a home that is "for sale by owner" and I don't use the agent to close the deal, then the agent doesn't get paid. Similarly, if I have to put the work in to close a client, then the AP doesn't get paid. I'm hiring them to do that work for me.
Okay. I am trying to set up this CTA in partnership with a marketing guy. I will trade and he will bring in assets. I will bring in the 100% capital requirement to set up the company. I am offering him 50% of management fees and 25% incentive fees. Does this seem fair? Besides marketing, he will also help with admin, compliance etc.
"Fair" depends on your CV, track record & other bona fides. It could be easy or tough to raise capital for you, so the fee split could be too high or too low. Would need much more info about you to judge.
Only when needed. If my AP is simply rounding up phone numbers and then making me do all the work, then what am I paying him for?
One thing to keep in mind is that no matter how good your marketing guy is investors will want to meet the decision maker. This holds true especially for small, unknown managers. I know this from experience. So, you can expect to meet each new prospective client at least once. Take that into account when deciding how much to pay your guy.
"Fair" has nothing to do with it. It is all about market value. What is the partner worth? Market value for capital introduction is 20% of incentive fees 0% administrative fees. Market value for hiring a third-party admin is about $500-1,000 per month depending on the size of the operation. By those standards you are giving up too much. He should be expecting a base salary of about $40,000 plus 20% of profit incentive from clients that he directly closed. No equity unless you want to set up some type of capital intro to equity conversion system. Something like 1% equity for every $1MM, capped at 20%.