Prime Brokerage Sales Tricks
There are some things that prime brokerage relationships managers will tell you to get you in the door which commonly turn out to be not entirely true. Here are the top 3 promises often broken and how to avoid these sales tricks while selecting a prime brokerage firm for your hedge fund.
Top 2 Prime Brokerage Sales Tricks:
1) Promise: "We can raise you capital if you join our prime brokerage platform"
How to avoid this trap: It is great if someone can help you raise capital, the problem is that everyone promises this. How many of these prime brokerage professionals have worked as third party marketers? How many have worked inside of a hedge fund raising capital? How many hold training sessions and provide hedge fund marketing training materials to their clients? In my experience, close to 0. The truth is that no prime brokerage firm can provide capital raising introductions and services to all of their clients unless they have client minimums of $300M+. What these means for most hedge funds is that they will have to settle for capital raising help of other sorts such as advice, training materials, seminars, etc. Ask to attend a seminar or see a recording of their hedge fund marketing training if this is what they have promised. Don't settle for someone who is "going to provide these services soon" or you are paying for their learning curve. Only work with prime brokers which can point to real tangible capital raising tools you can use starting Day 1 as their client.
2) Promise: "We can help get your hedge fund business in order"
How to avoid this trap: Advice is cheap, anyone can provide it. How do you pick out those experienced professionals over those who are just trying to make a sale? This trap is even harder to avoid because as the saying goes in the land of the blind the one eyed man is king. My best advice here is to ask for them to lay out how you would work together upfront and check around with 3 different prime brokerage firms in this same fashion. In my experience if you take the time to sit down in-person with 3 different firms and get to know them personally you can quickly get a feel for how honest, hard working, and diligent they are.
When I first starting moving from capital raising directly to being a capital raising advisor to a hedge fund and prime brokerage firm I met with over 10 prime brokerage firms in person and via conference call. Out of all of those only 3 of them came off as hard working entrepreneurial professionals like myself. The rest had already "made it" and were making good money and were not working as hard as a hedge fund startup or successful capital raising generally has to.
If you want to speak with the prime brokerage firm I ended up partnering with please submit the form below and we will get in touch shortly with tangible examples of how we deliver value instead of just promises.
Disclosure: Please check with compliance and legal experts before taking any capital raising actions or signing any agreements of any type.