In the world of alternative investment brokerage, there are tales of great success, and immense frustration.  After hearing thousands of stories over the course of my career, I realized there were 10 basic fundamentals which, in most cases, lead to a broker’s success or failure.   Though these concepts may seem like common sense, unfortunately when the time comes, many brokers choose dreams over realism.

In this article, we will outline the facts of alternative investment brokerage, while providing great tips for aspiring brokers.  This will help you grasp the facts of the industry, and adapt to future circumstances as an alternative investment broker.  What are you waiting for? Scroll down and take a look!

The 10 Facts of Alternative Investment Brokerage

1.  Brokering Alternative Investments is Not Very Easy:  Even though you can be very successful brokering alternative investments, it takes a lot of effort. First, you have to define the market you are going to broker.  In most cases, this will either be the forex, futures, private placement, or hedge fund markets if you’re focusing on alternative investments.  After you choose the market to broker, the next step is to find a good alternative investment opportunity.  Though this seems like it would be the toughest part, you haven’t heard the next step yet.  Once you have completed the two prior stages, you then need to do the hardest thing of all, raise equity.  As you can see, brokering alternative investments is rather hard, BUT there are thousands of self-made millionaires who make it look simple every day.

2.  Alternative Investment Brokers Need the Right Personality:  Everyone is NOT born to be an investment broker.  It takes an aggressive person who is willing to speak to thousands of people just to find that one big opportunity.  If your AMBITION and VISION don’t set you apart from others, you will NEVER succeed as an alternative investment broker. In addition, when brokering volatile investments, you must realize it can take you on an emotional rollercoaster.  All it takes is one big mistake to devastate an investor’s account, and finally at that point, you’ll know if you are right for the position.  Be honest with yourself, if it doesn’t feel exciting to broker large investment deals, then don’t waste your time.

3.  It’s Tough to Find a Good Alternative Investment to Broker:  If you choose to broker alternative investments and find your market of choice, the next step is finding a good opportunity.  Though there are some GREAT alternative investments in the market, they are also hard to find. To be honest, you MUST get creative via the Internet, or already be well-connected beforehand. If you are working in the managed FX or futures markets, look for traders with high yields and a history of infrequent draw-downs.  Also, if you want to pad your pocket, look for traders who place a large amount of trades.  This will allow you to earn far more commission, which is the goal, right? The one thing to remember is, don’t broker deals until you are experienced, and 100% sure of the opportunity you are offering.

4.  Private Alternative Investments are Hit or Miss:  Brokers who focus on private alternative investments can get rich far quicker than any other market.  Despite this fact, the main drawback is, they also have the HIGHEST rate of failure.  Depending on the market you are brokering, legitimacy is always a problem you run into.  If you are working with a private FX or futures trader, you can make a killing, as long as you find that needle in the haystack.  On the other hand, if you are brokering private placement investments, your chances of success are far slimmer.  The SECRET to private placement success is found in one concept, “ratios”.  If you educate yourself and then speak with thousands of PPP brokers, you should have a good chance to close a large deal.

5.  Managed FX and Futures are the Fastest Growing Markets:  If you are wondering which alternative investment may be best to broker, it’s managed FX or futures.  Though there are great opportunities in other markets, if you are working with the right trader, NOTHING can compare.  In FX and futures markets, commissions are far greater than almost any investment industry.  On top of that, interest is growing faster than ever for these high yield investments. With hedge funds, private equity, and real estate ALL recovering from the financial crisis, why not look elsewhere? The truth is, if you found a good futures trader, and gradually acquired 5M of investors, you would be immediately retired and a multi-millionaire.

6.  Some Alternative Investments Require Licenses for Brokers:  When you choose to work as an alternative investment broker, you also need to decide if you want to get a license or not.  If you choose to broker transactions unlicensed, you can only work in private placement, real estate, or certain types of FX investments.  Though this severely limits your options, it also removes the hassle and cost of becoming licensed.  If you are someone who is “swinging for the fences”, then it is best for you to get licensed.  By getting a Series 3 License, and then registering with the National Futures Association (NFA), you can legally broker managed FX and futures investments.  Even though this process can seem arduous at times, if you want to make the big money, you should just suck it up and get the appropriate licenses.  At that point, you can solicit institutional or retail investors, and in all reality, the world is in the palm of your hand.

7.  The Amount of Equity Raised Measures Success for Brokers:  If you choose to become an investment broker, don’t think you are going to close one big deal and walk away forever.  Though this can happen if you broker the right private investments, REMEMBER, relationships fade when you don’t nurture them.  If you do choose to become a licensed broker, this is where it gets interesting.  Before you can become an independent broker, you must affiliate yourself with a licensed firm in that market.  By doing so, you open yourself up to the constant pressure of account “quotas”, among other things.  In many firms, you have to raise a certain amount of new money every month, or your job can be in jeopardy.  The truth is, raising equity isn’t really that hard, as long as you have support and a good product to pitch.

8.  Beware of Broker Circumvention in Alternative Investments:  Unfortunately, in the alternative investment business, greed can show up out of nowhere in deals.  With so much money on the table, the truth is, some people will change for the worse.  By sharing your contacts with brokers or investors, you are jeopardizing your commission and niche all at once.  Unless you have a GREAT relationship with either the fund manager or the investor, in many instances you can get cut right out of a deal.  Though this isn’t very common in licensed investments, if you are brokering a private investment, you should ALWAYS be on the look-out.  It just could be the difference between a Million Dollar check, and “another deal gone wrong”.

9.  Integrity and Realism Attracts Investors, Not Sales Pitches: It is great to have investors as an alternative investment broker, but ONLY if you obtained them the right way.  If you are completely honest and empathetic with your investors, you will build life-long relationships that will pay you the entire time.  On the other hand, if you overemphasize the benefits and fail to explain the risks of the investment, you’re on a path to disaster.  Even if you find a few investors who fall for your “slick” sales pitch, remember, it will ALWAYS leave you behind in the long run.   Be real with your investors, and remember the Golden Rule: “Treat others as you would like to be treated”.  This will make things far easier for you during the good times, and the BAD!

10. Alternative Investment Brokers Make Great Commissions:  If you are a successful alternative investment broker, you can get filthy rich in very little time.  Lawyers work day and night for $250K per year when all it takes is one big investor, and you’re instantly retired as a broker.  For example, if you had a 100M book of investors for a FX trader, you could be making over 2M per month.  The great part is, all you have to do is make sure the relationship remains stable, and you get residual payments until they close their account.  The reality is, if you want to become as rich as possible in the shortest amount of time, brokering alternative investments is the way to go.

In summary, with any job there are facts of the industry which must be acknowledged and adapted to.  As we mentioned, the 10 facts listed above will ALWAYS determine your level of success, or failure as an alternative investment broker. Remember, you CAN make a TON of money as a broker, but ONLY if you find the right investors AND close deals. Hopefully after reading this article, you now understand the realities of alternative investment brokerage, because if you’re sharp, there’s ALWAYS a pot of gold at the end of this rainbow…

InsideTrade LLC Staff
(412) 235-2855