Here's the deal: If your advisory business is commission-based, you can earn a 0.5% to 1% commission for a referral, based on volume, says Erik Mitisek, Exclusive Resorts' business development director. Are you a fee-only advisor? If so, there's still a major benefit, the club's purveyors say. Besides avoiding the hassle and expense of a historically poor investment vehicle-the vacation home-your well-heeled client can stay liquid and diversified. By keeping more assets under your management, you get to retain that all-important fee income. Some advisors, however, will probably opt not to take compensation to avoid any perception of a conflict of interest.

Robert Regnery, a CPA and partner and managing director for RPR Partners LLP in San Diego, says he personally joined Exclusive Resorts in November 2003, when membership rates were lower. "I don't like hotel rooms," he explained. It would cost him substantially more to own a vacation home outright. He estimates that booking a suite at the Four Seasons would likely run upward of $1,000 nightly. He has calculated the difference in what he would have spent staying at the Four Seasons and the significantly lower pro-rated cost of his ultraluxurious stay at Exclusive Resorts properties. He invests the difference in joint venture partnerships. "I'll continue to do that for years to come." He says he also has referred a number of clients and friends as members to Exclusive Resorts and rebated to them the $10,000 "credit" he would have been due.

One-quarter of the $513.3 million in fractional interest sales by developers during 2003 was generated by private membership clubs, says Ragatz Associates, the Oregon-based research arm of Cendant Corp., the New York-based timeshare developer and exchange player.

The rapid growth of private nonequity clubs worries the national timeshare trade association, American Resort Development Association (ARDA), based in Washington, D.C., says President Howard C. Nusbaum. He fears that one of these private clubs may fail, tainting the entire timeshare industry.

ARDA calls a club like Exclusive Resorts a "prepaid nonequity club accommodations model." This business model, it says, has fewer consumer protections than traditional timeshares.

With a timeshare, developers must register a product and there must be a public offering statement, Nusbaum says. They must prove construction funding is available and that it is not coming from sales revenues. The underlying real estate can't be encumbered with debt, and a timeshare contract typically has a right of rescission.

Much of this, he says, is to ensure that if a developer goes out of business, the timeshare still will operate. "The guarantee of getting your money back in some of these (prepaid nonequity) clubs is not backed by insurance," Nusbaum says. "It's backed by supply and demand."

It's not necessarily the high-end, well-capitalized clubs that concern ARDA. Rob Webb, ARDA's treasurer and chairman of its legislative council, says he recently was alarmed by an ad for a private residence club with an offering purchase price of only $75,000. "That means they're appealing to more and more people," says Webb, who is a partner with the law firm of Baker & Hostetler in Orlando, Fla.,. "I hope we don't have a major failure before regulators can get their arms around how they feel about this product."

If your client buys a private nonequity vacation club to use and enjoy, that's great, particularly if there's no concern about getting money back, Webb says. "That's the smartest way to approach any prepaid leisure programs, including timeshares and fractionals. These are products to be used and consumed. They are not products that appreciate or give reasonable expectation of behaving like real estate in general. A financial advisor who is focused on investment risk and potential would do very well to keep that in mind."

However, a financial advisor reviewing a private vacation club with a client, he suggests, ought to consider these other factors.

Are the developer's economic assumptions underlying the appreciation of real estate too aggressive? Independently determine whether those assumptions make sense. Real estate may not necessarily appreciate at the rate it has been appreciating lately.