When small business owners become successful, they become a magnet for questionable deals and speculative investments. So says Bethesda, Md., planner Jeff Leventhal, who has developed a specialized practice serving entrepreneurs.

“What happens when you become this successful entrepreneur is every cousin and relative calls and says, ‘I’ve got this great idea,’” says Leventhal, a planner with HighTower Advisors.

In response, Leventhal has developed an unusual way to protect his clients from losing money on speculative ventures: He listens to pitches from solicitors himself, so his clients don’t have to. “We vet all these outside business opportunities and nine times out of 10, there is a reason why they shouldn’t be doing this.”

The service takes a huge burden off clients’ shoulders, he says: “One of the things they love the best is that [when they say no,] they can make us the bad guys.”


Here are the steps he takes to protect clients:

  • Guide clients to pick the percentage of assets that they want to allocate to very aggressive investments. Aim for between 2% or 5%, at the most, if the client is comfortable with risk.
  • Coach clients to tell any solicitor that they have an existing process with their planner to evaluate business deals. Leventhal's clients urge the solicitor to send him all materials related to the proposition.
  • When evaluating a pitch, determine whether the people asking for money have a written business plan for the business. If not, notes Leventhal, it’s probably not a serious venture.
  • If you do get a business plan, look to see whether the owners are putting their own money into the venture. If not, that’s another red flag, he says.
  • If a venture has both of the above, then you can begin analyzing the underlying business proposition. Ask yourself if the owners have conducted enough research into their industry. Have they addressed the market leaders in their field? Have they credibly laid out how they will defeat them?
  • If it's an industry you are unfamiliar with, bring in outside experts for analysis.

Most of the time, Leventhal reiterates, the deal doesn't pass muster. But occasionally, he says, he will support clients’ decisions to "loan" low amounts of around $25,000 to close family members or friends. But in those instances, he tells clients not to expect to see that money again.
Leventhal, who says he’s worked with more than 200 entrepreneurial clients, say he often gets grateful calls three or four years after a pitch, and after the ventures in question have failed.

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