How do I handle investor objections about my fees?
Short answer
Answer the objection directly and keep your fee structure simple enough to explain in one breath. I try to show investors one clear, transparent number instead of a stack of separate fees. Then say plainly what the fee pays for and what happens if the deal does not perform. In my experience, investors respond well to honesty. Many sponsors talk to a securities attorney about how they describe fees.
Most fee objections start with a fee stack
When an investor pushes back on fees, the problem is often not the size of one fee. It is the number of them. I hear this in my own webinars. Investors look at a deal and see an acquisition fee, a project management fee, a development fee, a disposition fee and a closing fee. Each one may have a reason. Together they look like a sponsor who is paid whether or not the investor wins.
So the first thing I would do is look at your own structure before you ever get on the call. If you cannot explain every fee in a sentence, an investor will not accept it either.
"I don't think investors appreciate it when you have an acq fee and then a project management fee and a development fee and a disposition fee and closing fees."
Mike explains why he keeps his fees fair and puts them into one transparent number, especially when working with co-GPs.
Simplify, then tie pay to performance
Mike, one of our webinar guests, said he does not take acquisition fees. In the cases where he acted as the broker on the buy side, he keeps a fee for that work. Otherwise he wants one number that is very transparent. He told us that approach has served him well with co-GPs.
We at Family Office Club push the same idea in our webinars. Some sponsors do run many types of fees and some are successful. But we encourage people to remove friction. In some cases that means making your pay more performance-based. When the sponsor earns more only if the investor earns, the fee conversation can get easier.
- Cut any fee you cannot defend in one sentence.
- Combine what you can into a single, clearly labeled number.
- Where it fits the deal, tie more of your pay to investor results.
- Many sponsors put every fee in writing and talk to a securities attorney about how it is presented.
Meet the objection head on
Even a clean structure will get questions. Do not dodge them. A guest on one of our capital raising panels put it well when talking about objections in general. He said the biggest problems come from unmanageable expectations. He qualifies investors first so he can set expectations early, and he tells them directly that if they do not trust how he will manage the business, he is not the right investment for them.
"Understand all the objections, hit them head on and don't skirt around them."
This panel guest explains why being truthful with investors earns more respect than sugarcoating.
Summary and key takeaways from this video
Apply that to fees. If an investor asks why you charge what you charge, say what the fee covers. Say when you get paid. Say what happens to your pay if the deal underperforms. Do not get defensive and do not pad the answer. In my experience, a straight answer earns more respect than a polished one.
Know which investors you are talking to
Not every objection is about fees. Sometimes an investor is simply not a fit. Qualifying early saves you from long debates with people who were never going to join. Our capital raising workshops, each about five and a half hours long, cover how to attract the right investors and how to remove friction from your structure.
One last note. Many sponsors talk to a securities attorney about how to describe fees in a deck, an email or a call.
From the Family Office Club stage
In my experience, fees can be more negotiable than many sponsors assume, especially when an investor is writing a larger check. When someone really needs the capital, people are often willing to lower or adjust fees to make the deal work. On the other side, I have pitched a structure where we do not make a dollar until investors have doubled their money. Most deals I see charge acquisition, disposition, financing, capital raiser and annual asset management fees. When you can show a plainly different structure, the fee objection often fades.
"And if you're helping an investor get set up and be more effective, oftentimes these fees are more negotiable than the investor knows, because the person really needs the capital, especially the larger size check. And people are willing to lower fees or adjust fees to make it work."
"Importantly, we don't make a dollar until you have doubled your money. Every other real estate deal that we have seen charges you acquisition fees, disposition fees, financing fees, a capital raiser fee and an annual asset management fee."
From the source
- A webinar guest named Mike does not charge acquisition fees and keeps a fee only when he acts as the broker on the buy side.
- Family Office Club's capital raising workshops run about five and a half hours each and cover removing friction and avoiding stacks of fees.
- One panel guest qualifies every investor before asking for anything, so he can manage expectations from the start.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Joint Venture & Co-GP Webinar - How to Close Deals with Peers & Partners in the Family Office Club, Success Raising Capital Stories from Teams Who Have Raised $50 Million. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around fee disclosure, offering documents and sponsor compensation structure. Do not use AI to write your own legal agreements.
Where to start
- List every fee in your deal and write one sentence explaining each.
- Remove or combine any fee you cannot defend simply.
- Consider whether part of your pay can be tied to investor performance.
- Practice a short, direct answer to the question 'why do you charge this?'
- Consider talking to a securities attorney about how fees are described.
People also ask
Should I charge an acquisition fee?
Many sponsors talk to an attorney about this question. Mike, a webinar guest, does not charge one. He keeps a fee only when he acts as the broker on the buy side.
What if an investor still objects after I simplify?
Answer the concern plainly and do not argue. If they still do not trust how you will manage the business, they may not be the right investor for this deal.
Does a performance-based structure help?
In my experience it can reduce friction, because your pay moves with the investor's results. Many sponsors talk to a securities attorney about how to structure and describe it.
Related questions
- What should I do when an investor goes silent?Change the channel before you send another email.
- How do I collect wire transfers safely from investors?Many sponsors collect investor wires after documents are signed, and send them to a separate account such as escrow or an attorney trust account instead of a personal or operating account.
- How do I get an interested investor to commit?Find out what the investor wants and offer that, not what you need.
- How do I create urgency without pressuring investors?Use real reasons to decide, like a closing date or a limited allocation, and say them once and plainly.
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