An introducer agreement is not a revenue share until the first statement arrives
Why the rate is the wrong number to negotiate in a bank introducer agreement, and the three questions to ask before signing.
I have four bank introducer agreements. Not one of them has ever sent me a statement.
That is not a complaint about any bank. It is a description of how this business actually works, and it took me longer than it should have to see it.
An introducer agreement reads like a revenue share. Twenty percent of custody and brokerage. Twenty percent of management and advisory fees. A percentage of net revenue on the client book. The percentage is what everyone negotiates, because the percentage is what looks like money.
Then the client’s account opens and a different set of clauses starts to matter.
One agreement pays a flat fee per account and calls itself an ambassador letter, with a revenue gate before anything further is due. It is not certain the gate is in the signed document at all; it appeared in an email. One agreement has the introducer irrevocably waive the right to inspect the calculation. One is silent on reporting altogether. One has simply never sent anything, and the figure I was eventually given arrived by phone, four months late.
So every number on my retrocession line is a number the bank chose to tell me.
The lesson is not that banks are dishonest. In my experience they are careful and slow, which is a different thing. The lesson is that an introducer who cannot independently verify a single franc of what he is paid does not have a revenue share. He has a promise. And the paper decides which of the two it is, in a clause nobody negotiates.
Read the reporting clause before the rate
If you introduce clients to banks, ask three questions of any agreement before you sign it.
- Does the bank owe me a statement, how often, and with what in it?
- Do I have a right to inspect or audit the calculation, and does it survive termination?
- Is the trigger for payment defined in the signed document, or somewhere softer?
A high percentage with no right to a statement is worth less than a lower one with an audit right. I would take the audit right every time now. I did not, the first four times.