Who is Private Money Public Enemy #1?

Who is Private Money Public Enemy #1

With all of our connectedness in the world today (Facebook, Twitter, etc.) it's easy to fall into the "everybody's my friend" trap.

Unfortunately, this is not true. In business, not everybody is your friend.

The "no-brainerness" of this should be obvious, but is lost on many. For instance, consider raising private money. Everybody is your friend when you are raising capital, right?

First of all, before we get too far in, let me say that you must always treat everyone as though they could be either A: an investor with you or B: a referral source for private money.

With that being said it helps if you know who your biggest adversary will be when raising private money. This person is a formidable opponent. Usually they have a lot of marketing dollars and brand power behind them.  Sometimes it can feel like a David vs. Goliath battle (never forget who won that fight by the way). But, if you underestimate or fail to account for this opponent, you'll cost yourself a great deal of private money.

So, who am I talking about here? Who is this great 'Public Enemy' number 1? It is...financial planners or investment advisors.

Ouch.

Did I  hurt someone's feelings?

Well, I probably offended every financial advisor out there. Oh well. Can't make everyone happy.

Public Enemy

Public Enemy was a ground breaking hip-hop group from the late 1980's and early 1990's. Led by front men Chuck D and Flavor Flav...ooops...you didn't want to know about those guys did you?

Back to regular programming...

Financial advisors are your public enemy number 1 when raising private money because you are both pursuing the same thing.

It's kind of like two guys that are going after the same girl for a date. Only one of them is going to win. While the guys  may be cordial with each other, it's pretty hard for them to be friends. All is fair in love & war.

When it comes to private money, you are competing for the same investment dollars the financial advisor is. The private investor has a choice about where they allocate their money. The Ameriprise or Merrill Lynch representative certainly has a home for that money - and all of it. You've got to stand your ground to get a piece of the pie.

I've had financial advisors purposely try to sabotage deals where I had private investors pulling money out to invest with me via a self-directed IRA. It wasn't pretty. These people are largely brainwashed into thinking that mutual funds and insurance products are the only investments available on earth. They walk the corporate line. They realized all of their compensation based in some form on bringing client money in the door.

Keep in mind also that most financial advisors work out of large firms that have big marketing budgets. This is why it's so important that you have a unique selling proposition for your investment opportunity. One thing that always works well for me is to remind my private investors about the incentives the financial advisor has.

The financial establishment makes money no matter what. Market goes up; they make money. Market goes down; they make money. I guess it's nice work if you can get into that sort of thing. But anyway, you - as a real estate investor - are going to make money only if the project is profitable. That's a 180 degree opposite and well-aligned incentive. You and your investor win/win. Not "heads I win, tails you lose."

Please just don't make the mistake in thinking that your private money investor's financial advisor is going to be excited about them pulling $250,000 out of their firm to invest with you. They'll probably be trying to find a doll and stick pins in it to derail your deal with some kind of weird voodoo (after all, I think that's how those guys pick their stocks). Luckily, voodoo doesn't work on real estate investors like you!