How to compensate referrals?

M

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.
 
Quote from 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.
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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.
 
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)).
 
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?
 
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...
 
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.
 
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
 
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
 
Quote from 2cents:

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
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Gotcha. Yes I also think thats not a pretty good idea. I like rewards for my work :D
 
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