How to compensate referrals?

Discussion in 'Professional Trading' started by mahras2, Feb 9, 2006.

  1. mahras2


    Need some help:

    Say this person acts as a referral and sends clients my way? How should I compensate him/her? What is the typical market rate? This person is asking for 20% of the performance fee I collect which looks too high as s/he isn't taking the risks, I am.

    Anyone have any experiences with this? Any help appreciated.
  2. But it is her relationship, and relationship is important in this business. Again, I have seen a wide spectrum, from 20% of first-year performance fee only, to 15% of all fees.
  3. 5% is more apt.. & should never exceed 10%.
  4. If your a-number-one foremost goal is to increase assets under management, pay your asset gatherers 100% of your performance fees. (in a 2-and-20 structure, give them all of the 20. You keep the management fee (the 2)).
  5. AaronCapps

    AaronCapps Global Futures

    depends on how much you need, people that don't need to raise funds and have a name usually pay 15%, people that are trying to raise funds or new in the industry usually pay 20-30% What risk are you really taking, are you splitting profits and risk?
  6. stupid.... nobody with anywhere near a decent perf needs give away perf fee so badly to collect funds...

    fwiw, i charge 0-20 monthly for 1st tier clients (generally long term acquaintances, business or otherwise), and 1/2pip mark-up on all transactions. people who have money with me, and only them, can refer other people who trust them, thats a 'trusted person chain', saves me a lot of headaches... i charge the referred persons 0-25 monthly, i keep 20, referrer gets 5, i.e. 20% of the perf fee...
  7. mahras2


    Thanks for the replies. Goes to show you the range of different numbers being paid to referrals.

    Rufus> Yes the value of relationships is not to be undermined. Without money all the world's best models and traders are useless.

    horribilicus> Well I certainly dont need that!

    Aaron> No, losses are not split. There is also no management fee, or transaction fee changed. Basically the only way I make money is if the client makes money.

    2cents> I dont need you to tell me whether I am stupid or not. I simply dont wish to take in referrals while not at least compensating the person sending money my way. These are people I know (friends, family, relatives) and they have trust in me. Therefore, I would like to at least reward them for having enough trust to recommend me to others.
  8. i wasn't telling u u r stupid mate... just reacting to the suggestion of giving away all of the perf fee just to attract more funds
  9. AaronCapps

    AaronCapps Global Futures

    standard is 20%, if it's friends and family that are just going to do a hand shake introduction, i would lower it and/or maybe make it limited to one time, if it's lay down i would do the 20% for the life of the client. If the person is building a business promoting you, then you may need to pay more if the referral agent will do advertising and sales. It's all relative to the work involved
  10. mahras2


    Gotcha. Yes I also think thats not a pretty good idea. I like rewards for my work :D
    #10     Feb 9, 2006