Tiger, a forum for the ultra-affluent, has members who see the beauty of working with squeaky-clean advisors

April 30, 2010 — 4:27 AM UTC by Elizabeth MacBride

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In the wake of the financial meltdown and losses on too-risky investments, the wealthiest investors are seeking out a different kind of financial advisor, says the leader of a peer-to-peer learning group called Tiger 21.

Tiger 21, which as been around since 1999, is a sort of high-end investment club for self-made people, many of them entrepreneurs, who don’t have a lot of experience managing investments. Its members, who meet monthly for educational presentations and networking, offer an interesting window on the wants and needs of the very wealthy. For a Tiger 21 update, See: Russell Investments and Fidelity both see disconnect between HNW investors and RIAs in separate studies

The 140 members who meet in 12 cities including New York, Miami and San Francisco, have average investible assets of $60 million. Tiger 21 is in the process of forming a group in Washington, D.C.

Jonathan Kempner, president of Tiger 21, says the financial crisis and the recession shook many very wealthy investors to their core. “Now, everyone is skeptical,” he says.

Gone is the emphasis on returns. Instead, wealthy investors want a solid track record, crystal-clear ethics, and an advisor who can explain in detail what an investment is and does.

“The mantra is, “Know what you have,” says Kempner.

Eagle-eyed

Members are also watching eagle-eyed for any sign that an advisor’s primary interest is to grow fees by growing assets, or making commissions on unnecessary trades.

‘They are asking, “Is my advisor making my needs paramount?” Kempner says.

Tommy Gallagher, a veteran Wall Streeter and member of the club, says that the very wealthy are vetting advisors harder than in the past.

“They want to know, where are you clearing? Who is your accountant?” says Gallagher, who retired in 2001 as vice chairman of CIBC world markets USA.

Underlying possibility

At its monthly meetings, Tiger 21 has regular presenters who are often investment advisors. Though the content of the presentation is educational – typically about a particular type of investment – there is an underlying possibility of winning clients, he notes. Members often subject presenters to tough questioning.

“A lot of times, they want to put perfomance in context,” says Gallagher. “Someone will come, say they have returns of 14% year … then after you dig you find out everyone else has 20%.”

The Goldman Sachs scandal is only deepening the trust of investment advisors in general. Indeed, Kempner said he doesn’t believe members focus much on the differences between wirehouse and independent advisors.

However, the changed attitude among the very wealthy translates into new opportunities for advisors who can make a good argument that their business model trumps the old, ethically challenged way of doing business.

On the move

The market of financial services for the richest Americans is on the move, based on data developed by Boston-based research firm Cerulli Associates, which found that the number of investors with a net worth of $10 million or more keeping their assets with two or more advisors jumped to 60% from 43% between August 2008 and June 2009.

Katharine Wolf, a senior analyst with Cerulli, said the data is a sign that the wealthy investors are vetting new advisors fast, by moving some assets to a different advisor and then comparing the services provided.

“Usually, that (vetting) process happens much more slowly,” she said.

The movement of the very wealthy may also be helping to develop the multi-family office niche. The very wealthy who are dissatisfied with the performance of advisors may be migrating to those who specialize in serving the very wealthy.

At Schwab, “we are not seeing our advisors struggling with attrition,” says Janelle Sallenave, vice president of client experience at Schwab Advisor Services. She oversees the multifamily office support provided by the custodian.



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