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June 9, 2014

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Millionaire support group skeptical of advisersBy Helen KearneyNEW YORK | Fri Apr 30, 2010 8:47am EDTFinancial advisers aiming to recruit members of a self-help group for multimillionaires called TIGER 21 shouldbe afraid, very afraid.An exclusive club whose members must have at least$10 million in investable assets and pay $30,000 a year,TIGER 21 is a veritable beehive of skepticism about theindustry that wants to get its hands on their money.”Most of our members think 25 percent of advisersare talented and add value, but the other 75 percentare primarily motivated by their own gain,” the group’spresident, Jonathan Kempner, told Reuters. “In TIGER21, members help each other identify those 25 percent.”Members of TIGER 21, or The Investment Group forEnhanced Results in the 21st Century, get their advicefrom a gold-plated roster of guest speakers: billionairecorporate raider Carl Ichan, Blackstone Group (BX.N)Chief Executive Stephen Schwarzman, oilman T. BoonePickens and money management giant Jeremy Granthamhave all appeared at group meetings.The group was formed over a decade ago by MichaelSonnenfeldt, then a 43-year-old real estate entrepreneurwho had recently sold his business and felt he did nothave the necessary skills to protect his windfall.”I spoke to advisers, brokers and lawyers, but I feltthat everyone had something to sell me … they were justconcerned about which of their products fit my particularchallenge,” he said in an interview.Sonnenfeldt had previously been a member of a CEOgroup that met monthly to swap ideas on management,and he recruited fellow members who had also soldbusinesses to start a group that could support themthrough the next stage of life.”I really just wanted to get a community of peers intothe room to have an open, honest conversation,” he said.TIGER 21, which started in New York, now alsohas multiple groups in Miami, Dallas, San Diego, SanFrancisco and Los Angeles, and expects to start a groupin Washington, D.C., in May. There are 12 to 14 membersper group.DEFEND YOURSELFThe idea is wealthy businessmen have a lot of knowledgeto share about the markets, investments and other issuesunique to the rich. Members discuss family issues, raisingchildren to deal responsibly with wealth and donating tocharities.”It’s difficult to discuss issues of wealth with friends orneighbors,” said Los Angeles-based member Mark Kress. “In this group I can see how other people with wealth liveand how they deal with generational issues.”Each month, one member of the group gives a”portfolio defense” laying open his or her entire portfolio ofinvestments for other members to examine.Kress, founder of a company that makes treatmentsfor hair loss, recalls that his first portfolio defense was”brutal.”The other members told Kress he had too many smallinvestments to keep track of, and he would only get amediocre returns at best.At the time, Kress had two financial advisers, one atMerrill Lynch & Co and another at Bear Stearns Cos. Hesaid the advisers were aware of his investments outsideof their individual firm but did not seem very interested inthem.”I felt their emphasis was on their own products andthey weren’t totally serving my needs,” he said. “And therewas a lot more emphasis on buying than selling.”Kress now uses a family office adviser recommendedby other members of the group and is pleased with hisperformance.Tommy Gallagher, a former senior executive of WallStreet brokerage Oppenheimer & Co, is even moreskeptical of advisers.After a 40-year career on Wall Street, starting out as arunner at the New York Stock Exchange and rising to vicechairman of Oppenheimer, Gallagher, 65, said that sinceretiring in 2001 his main job is managing his own money.”I don’t think financial advisers are demons, but youhave to remember they are being compensated by puttingyou into certain asset classes and, for the most part, theydon’t have a full understanding of your portfolio,” he said.Gallagher uses a number of money managers, whomhe selects himself. He has a significant investment withJames Belcher of Balestra Capital, whom he met whenBelcher was a guest speaker at a TIGER 21 meeting andhe shared his doubts about the stability of the subprimemortgage market.”I chose him because he sees the world in a similarfashion to me and he knows how to make money in thoseconditions,” he said. Gallagher says that Belcher’s betagainst subprime largely shielded his portfolio during thedownturn.And if you impress a member, the payoff can be huge.”There are a handful of advisers who have 10, 20,50 TIGER members as clients. They started with onehappy client who introduced them to the group,” saidSonnenfeldt.