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Personally, I would be very suspect as to the motives of the person that approached you. I belong to an investment club and I am the 'portfolio manager' or 'chief investment officer' or whatever you want to call it - and yes, they compensate me. However, I didnt ask them, they asked me and, at times, I regret accepting. To me, it's a hobby as I have my 'real' job. Our partnership agreement specifically states that my compensation is based solely on our profits. No profits, no compensation... and they dont compensate me much anyway.

I did my homework to determine if it would be legal for me to act in this capacity: I talked to my lawyer, I called my state's Attorney General's office (Securities Division), etc. Yes, it is legal for me to act in that capacity as long as 1) the club has less than 100 members and 2) the club's balance is less than $25 million. We began in December 2008 with 12 partners, each partner made a capital contribution of $1000 and we are off and rocking.

Kudos to you for going the distance and learning exactly what your state's rules are regarding compensated advisors. Each state sets its own rules -- some are more restrictive than yours.

What's missing from your post (perhaps because you were writing from your own perspective), is whether the rest of the club did its own due diligence before asking you to advise them.

Failure to do due diligence is an open invitation to being scammed.

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