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Do You Need a Placement Agent? And How to Vet One.

Dec 17, 2020

As this crazy year draws to a close, we look ahead to the future with both excitement and caution, knowing that the path remains largely uncharted.

Deserted road

Like us, you may be contemplating the new year and wondering how to strategically position yourself within it. Recently, we've received numerous inquiries regarding the efficacy of using placement agents. Are they truly worth the investment in terms of money, time, and effort?


Here are our insights.


Understanding Placement Agents

Placement agents, or third-party marketers, provide a range of services to managers that vary in both price and delivery. It's essential to consider several factors before deciding to hire:

  • Do Your Diligence:

    • Check the firm's background, check their references, google them, look at their LinkedIn, and check their reputation.

    • On top of this, extend your check and look at their Broker-Dealer.

    • Do they have the proper licenses and regulatory affiliations?

  • Check Their Marketing & Sales Strategy:

  • How will they tell your story? Do they have a good understanding of your product? Ask to hear the pitch of your firm.

  • Learn about their process and have them walk you through it. Find out how involved you will have to be in the sales process.

  • What is their marketing strategy? Is it traditional or virtual, or both?

  • Are their metrics in line with your goals?

  • Find Out How They Attract Investors:

    • It is way more than just a Rolodex. Can they find you the RIGHT investors?

    • Do they use key metrics? Do they have organized data?

    • Are there overlaps or conflicts of interest?

    • What segment of the market is their audience; institutions, investment advisors, UHNW, family offices, and do they know how to market to those investor types?

  • Qualify the Contract and Have a Well Defined SOW (Statement of Work):

    • The range of placement agents' capabilities varies significantly from just introductions to providing value-added services (e.g., preparing marketing material, strategy, roadshows, pitch coaching, etc.). One must consider what level of services are needed and make sure the fee structure is in line with the services provided.

  • What level of engagement will you receive?

  • How many clients do they serve?

  • Will there be retainer fees or exclusivity fees?

  • Take a look at the length of the contract, what benchmarks they have set up, and most importantly, ask what success looks like to them? There should be transparency.



Considerations and Costs

Remember, nothing is free. Some managers believe that hiring a placement agent is a "free option" as they think they get paid only on success.


Remember that the placement agent will be representing YOU. This will be your front end billboard, and they have to tell your story correctly and to the correct audience. They should be building market collateral. This is everything.


If you work with the wrong third-party marketer, it can cost you dearly. You might lose valuable time and waste a lot of money. On the other hand, finding the right person or team can be a game-changer.


Many managers ask us about the state of retailer fees. Unlike in the past, the zero retainer fee model is almost extinct. We typically see a range of $5,000 to $15,000 per month. We strongly advocate for a retainer model as it better aligns interests; however, like all vendors, managers have to manage metrics and KPIs to ensure success. Keep your vendors accountable.

In-House and Outsource balance

There are many options for marketing and sales, therefore finding the right combination of outsourced and in-house resources is critical.


PrimeAlpha has been paving the way for Managers and Investors for years. Our success speaks volumes. Learn more about how we can help you make the correct turns on the road ahead.


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​Important Disclaimers
This article (the “Article”) is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase any investment or any securities. This Article does not constitute investment advice and is not intended to be relied upon as the basis for an investment decision, and is not, and should not be assumed to be, complete. Readers should make their own investigations and evaluations of the information contained herein. The information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person or entity who may receive it. Each reader should consult its own attorney, business adviser and tax adviser as to legal, business, tax and related matters concerning the information contained herein.  Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date of preparation. Certain information contained in this Article constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,”  “target,” “project,” “estimate,” “intend,” “continue” or “believe,” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Readers should not rely on these forward-looking statements.  Certain information reflects subjective determinations which may prove to be incorrect. There can be no assurance that the estimates or projections will be accurate or that historical trends will continue. In considering the prior performance information contained herein, readers should bear in mind past performance is not necessarily indicative of future results. All rights reserved. The material may not be reproduced or distributed, in whole or in part, without the prior written permission of PrimeAlpha LLC.

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