He Trusted His Brother-In-Law With His Investments Instead Of An Advisor. Now He Feels Blindsided By The Huge Fee. ‘This Is Highway Robbery’
What started as a small family investment arrangement turned uncomfortable after one man realized his brother-in-law expected a massive share of the profits for managing his money.
During a recent episode of “The Ramsey Show,” Dan told hosts Rachel Cruze and George Kamel that he had handed over $10,000 about two and a half years ago to a brother-in-law who managed investments on the side. While the account had grown to roughly $15,000, Dan said the two had never fully agreed on compensation until recently.
A Hedge Fund Style Fee On A Small Family Investment
Dan told the hosts the proposed arrangement sounded similar to a “two and 20” hedge fund structure.
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“We get the first 10% and then anything above that like he would get 20%,” Dan explained. He later added that another figure being discussed was 25%.
“This is highway robbery,” Kamel immediately pushed back.
The hosts explained that most licensed financial advisers charge around 1% annually for assets under management, sometimes slightly higher, but nowhere near 20% to 25% of profits.
Things became even more concerning when Dan revealed the brother-in-law was not a licensed financial adviser and did not work for an investment firm.
“He’s just a family member who talked to some finance people and worked out some investment thing,” Dan said.
Cruze and Kamel repeatedly questioned why Dan was paying such steep fees for what appeared to be a do-it-yourself investing strategy.
The investments were reportedly tied mostly to the S&P 500, although Dan later admitted there were also covered-call options strategies involved.
“You’d be better off just doing this with an actual professional,” Kamel said.
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Family And Money Often Don’t Mix
The conversation quickly shifted beyond fees and toward the risks of mixing family relationships with money.
Kamel warned Dan that many situations like this end badly.
“Usually this call ends with, ‘All the money’s gone and I can’t get in touch with him,’” he joked.
“I don’t know exactly what it is,” Dan admitted to not fully understanding the strategy his brother-in-law was using.
That prompted one of the strongest warnings of the segment.
“Never put your money in something you don’t understand,” Cruze said.
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The hosts urged Dan to untangle the arrangement while things were still relatively positive. Cruze suggested framing it diplomatically by saying he and his wife were reorganizing their finances and wanted to move the money elsewhere.
Kamel also added that if the brother-in-law became angry about Dan pulling out, it would likely confirm that the arrangement was a bad idea from the beginning.
Despite the concerns, the hosts acknowledged the investment had at least produced gains during a strong market period. Still, both argued that simple index fund investing through a licensed adviser or traditional
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