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June 9, 2014

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THURSDAY, DECEMBER 2, 2004 ¬©2004 Dow Jones & Company. All Rights ReservedThe Investment Club You Can’t Get IntoWary Wall Street, Wealth Families Form Peer Groups to Share Advice, Manage MoneyWEALTHY families arediscovering a new sourceof financial advice: eachother.One of the hottestcorners of the wealth-managementbusiness is “peering” whereorganizations charge wealthy familiesto meet other wealthy families. Theidea is for families-tired of the hard-sell from wealth-management firmsand private banks-to band together informal peer groups to swap ideas andadvice.Those who join can get first-handrecommendations on such things asfinding hedge funds to hiring private-jet pilots and preparing kids for theirinheritance. They can also makeinvestments together and get groupdiscounts from money managers, banksand even travel companies.The groups, which include New York-based Tiger 21 and Met Circle, as well asBoston-based CCC Alliance, aren’t justhigh-end coffee- klatches or investmentclubs. Most charge thousands of dollarsin annual dues and require members tohave several million dollars in liquidassets. There are monthly or quarterlymeetings, and most groups have secureInternet networks that allow membersto trade questions and answers.The groups are growing in popularityas the number of rich families growsin the U.S. There are now more than130.000 households in the U.S. withnet worths of 510 million or more,more than double the number in 1990,according to a Federal Reserve surveyof consumer finances.Wealthy families have traditionallytiled to private banks, trust companiesand brokerage firms for advice. Butwith bank consolidation. conflict-of-interest scandals on Wall Street, andmore intense competition Amongwealth-management advisers, families often fear that theirinterests no longer comefirst. Some don’t trust theadvice they are getting,says Preston Tsao, headof Met Circle. Mid many”feel like they’re gettinglost in the shuffle.”Each of the new groupshas a different focus-and some are morecommerciallyminded than others. NewYork’s Tiger 21 is oneof the fastest growing.Founded in 1998 .bysix entrepreneurs whocashed out of theircompanies and gottogether to help eachother as investors, Tigernow has 40 members managing morethan i4 billion of their assets, accordingto co-founder Michael Sonnenfeldt,a successful real-estate developer. Tojoin, members need at least 510 millionin assets; they pay a fee of $30,000 ayear.Tiger also evaluates prospectivemembers, looking for smart, activeinvestors with specific expertise. Theydon’t take someone who may have shuckit rich through a divorce settlement, forexample. “We like our members to havesomething to offer, and something tolearn,” Sonnenfeldt says.To achieve some intimacy, Tigerdivides its members into smaller groupsof no more than 12 individuals. Withmembership rising, Tiger launched afourth group this fall and is about tolaunch a fifth. The organization plansto move into larger office space inManhattan to house its growing staff andhold bigger events. It is also consideringrenting office space to members andselling them concierge services andtravel advice.iger 21 is knownin the industry asthe “deals” peergroup; membersoften get togetheron big acquisitionsor investments. Onegroup, for example,bought an oil well.They also chat aboutfamily issues andliving with wealth.The main eventfor Tiger 21 groups isan annual “portfoliodefense.” Membersget up in turn to layout their personalbalance sheet incomestatement andfinancial aims. Othermembers challenge the presenter’sdecisions and suggest alteratives. Allare hound by strict confidentialityagreements. “We’re not there to judge,”says Mr. Sonnenfeldt. “This is what wecall a ‚Äòcarefrontational’ approach.”Tiger 21 often gets discounted rateson financial products and services, andthe savings are passed onto members.The organization doesn’t make anymoney from companies looking to sellproducts to its members and allowsno corporate members. Met Circle,another New York peer group with 1011families, also has a strict “no vending”policy-meaning no corporate membersor sales pitches. Families meet twice amonth to chat about everything fromhedge funds to real-estate. One of themeetings is a ‚Äòround-table” limited tofamily members. The other meetingfeatures an outside presenter.CCC Alliance in Boston has takenthe peer-group model a step furtherby teaming up with University ofPennsylvania’s Wharton School. In anewly launched joint program called Wharton Global Family Alliance,dozens of wealthy families-includingCCC members-help the schoolconduct research on family businesses,philanthropy and wealth management.The research is then shared with thefamilies and incorporated in Wharton’sacademic programs on family business.With a peer group “you can turnto other families whom you get toknow and test over time,” says LairdPendleton, a founder of CCC Alliance.”These are families who have walked inyour shoes and maybe even been downthe same path.”Some peer groups have taken acommercial approach to the trend. TheNew York-based Institute for PrivateInvestors and the Chicago-based Family Office Exchange, which are rummore like businesses, derive revenuefrom companies that sell products tothe wealthy. The Institute has about310 family members and about 175companies. The firm aims to fosterbetter communication between wealthyfamilies and wealth-management firms.Charlotte Beyer, president and founderof the Institute, says that about half herrevenue comes from companies and theother half from families. Rather thancreating a conflict, she says, corporatemembers help educate family memberswith their expertise and in-depthexperience. “You cannot close the doorand just have a group of families talkingto each other,” she says. If a group hasa dominant member who recommends a particular investment that isn’tappropriate for the others, she says, “thewhole group can go off like lemmingsoff the same cliff.”Along with regular meetings, theInstitute hosts two electronic messageboards-one strictly for family membersand another that’s open to vendors.Members post questions like “Anyoneknow a good overseas bond fund?” or”Preparing children for wealth?” Thequestions are sent to the families-onlygroup first, then, with the names of thequestioners removed, they are submittedto vendors for response. The answers areposted for others to see.”Peer groups can be fabulous, but theycan be dangerous if there is no teachinggoing on,” Ms. Beyer says.