Fund formation and first-time fund managers
What does a placement agent do and what do they charge?
Short answer
A placement agent introduces your fund or deal to investors and manages part of the raise. In my experience they charge a monthly retainer, sometimes an upfront fee to fix your materials, and a percentage of the capital they bring in. For small deals that percentage can run 3 to 7%. Many sponsors talk to a securities attorney about any agreement before signing.
Think of a placement agent as a paid go-between. You hand them your fund or deal. They tighten the story, shape the materials, and try to put you in front of investors they already know. Many sponsors talk to a securities attorney about how a placement agent's registration and pay structure might apply to their situation before signing anything.
The fee stack I see most often
I have talked about this with managers for years. This is how I describe an investment bank style arrangement when someone asks me.
- A retainer of 3,000 or 5,000 a month, paid whether or not anyone invests.
- An upfront fee, for example 30,000, if they decide your materials need to be redone.
- A fee of 1 to 2% on the capital they raise.
- On a small deal, 3 to 7% of the capital they raise.
- For a hedge fund with continual fees, sometimes 10 or 20% of the fees you earn from that capital, and in some cases for as long as the investor stays in.
Their argument for the retainer is that they are investing time. They also worry you might change your mind or say the wrong thing at closing after they bring a great investor. That is a fair concern. It is still money out the door before any capital comes in.
In this webinar I walk through the retainer, upfront fee and percentage numbers an investment bank typically asks for.
Summary and key takeaways from this video
Why we stay out of this business
We at Family Office Club do not do this work. I say it plainly whenever the topic comes up.
"We're not investment bankers and we're not your placement agent. We're not going to raise capital for you for a percentage success fee."
I estimate there are about a thousand placement agents out there who raise capital for a percentage of what they raise. We chose to help in a different way. That means workshops on how to raise capital, investor databases, and a review of your pitch materials. If you want the marketing done for you, my four person PitchEx agency works on a retainer. Most clients pay 2,500 to 5,000 a month, and a few pay 8,000 to 10,000.
Here I explain why we skip placement work and where we try to help managers instead.
Summary and key takeaways from this video
Questions to ask before you hire one
Ask what the retainer actually pays for. Ask whether the agent already knows investors who buy your type of strategy. Ask how the percentage applies if you close with an investor you introduced yourself. These are general business questions, not legal advice. Many sponsors have a securities attorney read the agreement, especially any tail period or ongoing fee.
Also ask whether you would be better off learning to raise the capital yourself. Many people never raised money before and now need to. It is a useful skill, and many people do not know how to do it. An agent can open doors for you. It will not teach you how to keep them open.
What I have said on this at our events
A placement agent is not a cure for a weak raise. I see people hear that they found an agent and assume their problems are solved, and they are not. I have watched managers pay a $50,000 retainer and get no capital and only two meetings that went nowhere. A raise needs many things lined up together, including the product, the team and the materials. One agent cannot supply all of that, so judge the retainer against what else is missing.
"There's no one magic bullet. It's not all about finding the right placement agent. A lot of people pay the $50,000 retainer and get no capital raised, and only two meetings out of it that don't go anywhere. It's not about just having the right product or just having the right team. You have to have many different things aligned."
"That's why lots of times people think, oh, I found this placement agent. They're going to solve all my problems. They won't."
From the source
- Small deals may carry a placement fee of 3 to 7% of capital raised, versus 1 to 2% on larger ones.
- Some hedge fund placement agents ask for 10 or 20% of the fees you generate from capital they raise, sometimes for as long as the investor stays in.
- I estimate there are about a thousand placement agents who raise capital for a percentage of what they raise.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: 7 Strategies to Leverage Our Investor Club and Raise More Capital (Webinar Recording), Capital Raising Frequently Asked Questions Webinar. 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 placement agent registration, fee agreement terms and tail period provisions. Do not use AI to write your own legal agreements.
What to do next
- Write down what you need help with: introductions, materials, or running the raise.
- Ask any agent for their fee terms in writing, including retainer, upfront fees and tail periods.
- Talk to a securities attorney about how to confirm the agent's registration status.
- Get your pitch materials reviewed before paying anyone to rebuild them.
- Compare the total cost with building your own investor outreach.
More questions on this
Do placement agents always charge a retainer?
No. Some work only on success fees. In my experience investment bank style firms often ask for a monthly retainer of 3,000 or 5,000 on top of the percentage.
Are placement agent fees negotiable?
Often, yes, and the numbers I gave are ranges, not fixed prices. Many sponsors talk to a securities attorney about the terms before agreeing.
Does Family Office Club act as a placement agent?
No. We never raise capital for you for a percentage success fee. We offer workshops, investor databases, membership and a marketing agency.
Related questions
- How much does it cost to set up a private fund?It depends on the structure, the number of investors and the law firm, so I won't give you one number.
- What are clawback provisions in fund agreements?A clawback provision in a fund agreement is generally meant to bring back money that was already paid out, under conditions the agreement sets.
- How do I start my first private equity fund?Start by learning who will fund it.
- Do I need a fund administrator for a small fund?Often not on day one, but plan on it early.
Work through it with the waterfall calculator. See all fund formation and first-time fund managers resources.