Monday, September 28, 2009
Important Tips for Private Placement Programs
In 2009, there are now more people than ever who are looking for private placement programs. Even with such a small and “private” niche, approximately 3000 prospective brokers/investors type “private placement program” into Google every month. With this recent growing interest, a flood of undereducated individuals have tried to enter the business, and in response, it is now more polluted with fraud and misrepresentation than ever. Since I have met a number of people who were victims of their own ignorance, I felt it was critical to outline a few key points about Private Placement Programs.
Top 10 Tips for Private Placement
1. NEVER establish a relationship through email or Skype, phone is the ONLY way to feel people out.
Do you think that someone who has closed a private placement transaction would want to develop relationships through email or Skype? I don’t think so. Anyone who is successful, and not trying to hide something, values their time.
The only way to establish relationships in the private placement business is to speak over the phone, or meet face to face. People assess your tone and confidence, among other things, and email/Skype are much less effective since you are only communicating through written format. The fact is, you need to be able to feel someone out when you are working with “private investments”.
2. If you are looking to find a private placement program with less than 10M, the trader will NOT be trading bank instruments.
When you ask brokers what they are trading to generate these high returns, most say they are “buying and selling MTN’s and BG’s”. The fact is, bank instruments are issued in 100M notes, and you need serious money to purchase one. The only way you could even get a 10M client into a private placement, is if it was pooled with other clients to meet the minimum cost of the discounted note. (Ex. 100M Note, 35% Discount, Trader Buys for 65M, Need More than 6 Clients with 10M)
If you ever find a 1M program, they must be trading in some other market, or it just doesn’t make sense unless they are pooling money. In short, when dealing with such private transactions, pooling money is very dangerous. One bad apple can ruin the entire bunch, and you can waste tons of time and money chasing dreams. If there is an investigation due to complaint from anyone, the entire pool of money would be frozen for months, and sometimes it can even be years.
The point is, don’t waste your time unless you have the capital. There are other investments at 1M that have GREAT yields and a whole lot more transparency.
3. NEVER tolerate long broker chains in a private placement program.
Private placement deals never get done when there are more than 4 brokers involved (including the program manager and client rep). This is something that is critical when trying to get a deal done in the private placement business. As many of you know, there can be over10 brokers in a deal at time. Think about it, even if you closed the deal, the paycheck wouldn’t even be worth the mediation you would need to constantly perform.
The key point to remember is, if you can’t work your way quickly through the chain, you will be completely wasting your time.
4. Only work with brokers/traders who have closed a transaction before.
Though there may be THOUSANDS of people out there who claim to have a private placement connection, most of them never closed a deal. This can be something they have worked at for years upon years, with no success at all. Think about it, what are the chances that anything will change? To ensure you are not wasting your time, put the pressure on from the beginning. If you are aggressive on the phone and ask them immediately if they have been paid, you can tell by their response and tone if they are legit. Use that technique, as well as their level of intellect and experience, as your guide.
5. Use your gut instinct. NEVER BLIND YOURSELF by thinking about the money you are promised. Focus on the transaction now, and celebrate later.
The most critical and frequent mistake is focusing on the money, and not the private placement transaction at hand. Sit back and let this one soak in, there is some serious danger associated with following the zero’s and not common sense.
When clients hear about the “huge returns”, many make excuses for the inconsistencies that evolve over the course of most fake transactions. Look straight ahead at what you have or DON’T have, and keep the money and celebration for after the transaction. Private Placement Program deals are never closed by those who are greedy, or those who put the cart before the horse.
6. ONLY work with brokers/traders who can answer questions COMPLETELY to your satisfaction.
The thing that irritates me the most is that many brokers try to sell private placement programs like they are used cars. With this “pitch” comes promises of RIDICULOUSLY OVERESTIMATED returns, and miscommunication about the application process.
The fact is, you are not supposed to “sell” or even “offer” private placement programs, they are an invitation only opportunity. In short, if you aren’t blown away by their professionalism, both written and verbal, then don’t waste your time. There is a new breed of idiots trying to get rich quick in the private placement business, and you never want to find yourself to have been their “Guinea Pig”.
7. Ratios are your friend, speak to as many people as possible and create rules to qualify new possible leads. Never settle for something that feels less then genuine.
Today, there are literally thousands of people in the private placement program business. In fact, when we did our last count, there were over 40,000 “brokers” who have been in the business at some point over the last 5 years. Think about this for a second, there are maybe 100 of those people who are connected to a real opportunity, and as expected, those people are the hardest to find. It is a lot easier to get in touch with someone with no past success, than someone who is rich from past deals, and really doesn’t need the transaction.
If you want to be successful, you have to relentless. First, pick up a phone and contact everyone you see out there online, Second, rip emails from every related keyword you can think of to build contact lists. Third, keep notes and rate everyone to make sure you have records of the people you were impressed by. Once you send out some email blasts, and speak to thousands of people, you will then know the realism of your goals. Remember, ratios are your friend in the private placement program business. If you settle early, you may regret it later.
8. If there is a famous or public name attached to a private placement program, demand to speak with them to ensure you are in
Though there are a few well known people in the private placement program business, you always want to make sure the name isn’t just “bait” from the brokers. If you come across someone who drops a name, be suspicious, but demand to speak with this “well known” person. If you can verify that they are attached to the deal, then you might be on the right path. Remember, there are only a few hundred people connected to a real private placement program in the entire world, so don’t be too convinced by just a “name”.
9. ALWAYS follow non-solicitation laws, and NEVER state or guarantee the expected returns. All Private Placement Programs are based upon a “best efforts basis”, and NEVER state guaranteed returns.
If you speak with someone, and they tell you that they can “guarantee” a very high return, then hang up the phone. If this happens, I can guarantee you one thing, they have never closed a deal in the private placement business, and they do not understand the non-solicitation laws. If you state approximate or forecasted returns to someone before they go through compliance, without using the term “historical”, you are breaking the law and can be thrown in jail by the authorities. Private Placement Programs are no joke, you either do it right without luring people in, or you can pay some severe consequences.
10. PING programs DO NOT EXIST in the REAL private placement program business. Please stop promoting them, they NEVER work!
We will make it simple for you to understand, PING programs NEVER WORK. No bank will extend a line of credit to a trader that has no client collateral client in place. If your money is sitting in your account, and they are supposedly “PINGING IT” on regular basis, the lending bank has no authority to seize the collateral in the case of a default by the trader since it isn’t in their hands. The fact is, banks do not lend 100M to some random person unless they have collateral which can be liquidated to replace what was loaned. Even if the trader says they have their own line of credit ready, it doesn’t matter because they legally can’t trade their own money. They must use the collateral of another to stimulate the line of credit to start trading for profit.
On the other hand, if the cash backed collateral is blocked, conditionally assigned, or the trader is made a temporary beneficiary of the asset, the transaction can take place.
KEY POINT: If a client expects to keep their money in their own account, and just miraculously make high returns with no risk, they are BLINDING THEMSELVES with hope, rather than looking at the transaction with common sense. Remember the idea of the self fulfilling prophecy? Well, you can’t blind yourself to the realities in this business, or you will be broke fast.
Remember, for every successful investor who completes a private placement transaction, there are another 1000 who waste time following their hopes and dreams, rather than common sense.
For those who are interested in learning more about private placement, and alternative investment opportunities, please contact us via phone. We have worked successfully in the private placement business for several years, and are very experienced in various high yield investments.
InsideTrade LLC Staff
(412) 235-2855 (412) 235-2855
Submitted by InsideTrade Staff on Monday, 24 August 2009