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Managing your own finances can be complicated and intimidating.  Many prefer to take recommendations from their neighborhood banker or friend from high school who now manages money after a failed engineering degree.

It’s similar to when I arrive in a new city and new hotel, I always ask for a restaurant recommendation.  Often I’m directed toward the nearest Applebee’s or local pizzeria.  I immediately ask them where they frequent for a good meal and you get a great recommendation for fantastic food owned by a local chef.

Financial advisers do the same thing.  They provide you the safe, easy option that leaves you little reason to complain.  Many are limited themselves to only offering employer sponsored products.  Yet, over 50% of people are unhappy with their financial planners.

Yet, often their own money isn’t in the same stocks they recommend.  You may share a minor interest in Apple (AAPL), but who doesn’t these days?  I encourage you to ask your own advisor where their assets are.  (Hint, don’t ask about their portfolio…they’ll just tell you part of the story.)

Often, it may not even be in the stock market.

Where do they invest?

The financial industry may do one good thing aside from hiding fees.

They are good at funding great companies to get off the ground.  As much as investment banking and hedge funds are demonized, many of the best, life-changing companies wouldn’t exist without the initial venture funds.  No Facebook, no Pfizer, no Intel.

Many companies operate lose cash for the first 3-4 years of existence.  Product development, consumer education and marketing all costs more than the founder may have in their pocket.

Enter venture capital, hedge funds investment banks offering shares private placements.

In this world, companies are willing to give favorable valuations and high interest rates in order to keep their company moving before cash comes in the door.

Money managers are a target for companies seeking funds and quickly help themselves to the best deals.  Rather than leaving their own money to whims of distant CEOs, they invest in companies they can impact directly.

But if they are taking first dibs, where can you go?

Seek and ye shall find

Ironically, the first place you should try is a full-service broker.  As connectors of money to investments, they get dozens of private placement offerings on their desk.  Discount brokers reps are usually just administrative pawns and don’t get access to deal flow.

If you express interest and prove you have capital, you may soon find yourself in a world of exciting small companies.

If you don’t have one, start your search local.

I’ve lived in cities as small as 200,000 which had two separate venture capital groups.

These groups are all over the place.  Their role is simply to match local investors with business plans.  Local sponsorship is easy to find because encouraging small business means jobs supporting the nearby economy.

Don’t rely on Google, but it’s a good place to start.  Type ‘venture capital groups’ or ‘angel investing groups’ in your local area.  Visit a meeting or two to vouch the type of companies and people involved.  You may find industry specific networking groups as well.

It’s all a pipeline of potential private placement investments.

New platforms are trying to make these opportunities more available.

The most important criteria is your ability to act.  After you’ve done your due diligence, you’ll need cash to exchange for shares.

If you don’t have the cash in your bank account, you can tap into your IRA for private placements.  Terry Coxon has talked about it in his book, Unleash Your IRA.

I’ve worked with people who have used their IRA funds to get significant interests in mining companies, cell phone applications, the equivalent of the NFL in India, and foreign agriculture companies.

They are their own hedge fund managers.  They took control and did as the wealthy did, rather than blindly following the masses to mediocre returns.

Add these one at a time, and you’ll soon find your wealth is in your own control rather than subject to the whims of the economy.

Solid investing,

Passport IRA