Not Another Ponzi Scheme: Performance Fees vs Management Fees

As I stroll through the headlines this morning for my morning read, I just found out Floridians have been scammed by another "investor" operating a Ponzi scheme. In this most recent case, the schemer, like most other, lured investors in with luxury cars, "financed" mansions, private jets, and promises. His followers were duped out of $80 Million dollars (or more) as he promised them returns on their investments.

Well didn't he have a "TRACK RECORD" or Proven Results....

These days, people can "prove" anything especially with the levels of technology we have today. More than likely, most "track records" are credit (disguised as capital returns) or capital from other investors shown as "profit". Some people (even companies) will go as low as presented returns from practice accounts where they can manipulate desired returns.

Let's Be Honest, People Believe More in an Image than Themselves....

We are people social engineered (especially here in America) to believe a certain image, people of a certain race, an accumulation of materials, and titles are equivalent to wealth. This is programmed into our psyche at an earlier age here in America especially the northern region which is a credit-driven society. Credit in the sense that any person with a certain "credit score" can have access to funds, houses, cars, etc. The credit scoring system is an algorithmic formula to determine whether an individual is eligible to handle credit. Studies show that this system is proven to be flawed and prejudice based on the program and codes incorporated by the "coders".

Performance Fees vs Management Fees

Performance fees are fees given to an individual or company based on the performance of an asset versus management fees which are deducted regardless of a positive or negative return on capital. Most fund managers charge management fees which require licenses versus performance fees that are seen as "profit-sharing revenue". Performance fees appear to be fairer when it comes to managing capital because it obligates the manager to PERFORM.

Here at Frink Capital, we don't manage other peoples or companies' capital. Our goal is mainly to consult our clients (mainly companies) into performing at optimal levels to produce returns on their ventures (private equity or funds). We do require a performance which is a profit-sharing revenue agreement based on performance only (not management). Our goal is to provide the resource and information made applicable so our clients can manage their own capital with confidence.

Hope this short read encourages anyone or company with extra capital to invest to investigate more when it comes to people promising and propping up returns based on their lifestyle. In all due fashion, it's just a "show".