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June 9, 2014

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Posted: Tuesday, May 04, 2010The skeptical Millionaires clubAn exclusive club whose members must have at least $10 millionin investable assets and pay $30,000a year, TIGER 21 is a veritable beehive of skepticism about the industry that wants to get its hands ontheir money.“Most of our members think 25 percent of advisers are talentedand add value, but the other 75 percent areprimarily motivated by their own gain,” the group’s president, Jonathan Kempner, told Reuters. “In TIGER 21,members help each other identify those 25 percent.”Members of TIGER 21, or The Investment Group for Enhanced Results in the 21st Century, get their advicefrom a gold-plated roster of guest speakers: billionaire corporate raider Carl Ichan, Blackstone Group (BX.N)Chief Executive Stephen Schwarzman, oilman T. Boone Pickens and money management giant JeremyGrantham have all appeared at group meetings.The group was formed over a decade ago by Michael Sonnenfeldt,then a 43-year-old real estate entrepreneurwho had recently sold his business and felt he did not have thenecessary skills to protect his windfall.”I spoke to advisers, brokers and lawyers, but I felt that everyone had something to sell me … they were justconcerned about which of their products fit my particular challenge,” he said in an interview. Sonnenfeldt hadpreviously been a member of a CEO group that met monthly to swap ideas on management, and he recruitedfellow members who had also sold businesses to start a group that could support them through the next stageof life.”I really just wanted to get a community of peers into the roomto have an open, honest conversation,” he said.TIGER 21, which started in New York, now also has multiple groups in Miami, Dallas, San Diego, SanFrancisco and Los Angeles, and expects to start a group in Washington, D.C., in May. There are 12 to 14members per group.DEFEND YOURSELFThe idea is wealthy businessmen have a lot of knowledge to share about the markets, investments and otherissues unique to the rich. Members discuss family issues, raising children to deal responsibly with wealth anddonating to charities.”It’s difficult to discuss issues of wealth with friends or neighbors,” said Los Angeles-based member MarkKress. “In this group I can see how other people with wealthlive and 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 treatments for hair loss, recalls that his first portfolio defense was”brutal.” The other members told Kress he had too many small investments to keep track of, and he would onlyget a mediocre returns at best. At the time, Kress had two financial advisers, one at Merrill Lynch & Co and another at Bear Stearns Cos.He said the advisers were aware of his investments outside of their individual firm but did not seem veryinterested in them. “I felt their emphasis was on their own products and they weren’t totally serving my needs,”he said. “And there was a lot more emphasis on buying than selling.”Kress now uses a family office adviser recommended by other members of the group and is pleased with hisperformance.Tommy Gallagher, a former senior executive of Wall Street brokerage Oppenheimer & Co, is even moreskeptical of advisers.After a 40-year career on Wall Street, starting out as a runner at the New York Stock Exchange and rising tovice chairman of Oppenheimer, Gallagher, 65, said that since retiring in 2001 his main job is managing his ownmoney. “I don’t think financial advisers are demons, but you have to remember they are being compensatedby putting you into certain asset classes and, for the most part, they don’t have a full understanding ofyour portfolio,” he said. Gallagher uses a number of money managers, whom he selects himself. He hasa significant investment with James Belcher of Balestra Capital,whom he met when Belcher was a guestspeaker at a TIGER 21 meeting and he shared his doubts about the stability of the subprime mortgage market.”I chose him because he sees the world in a similar fashion tome and he knows how to make money in thoseconditions,” he said. Gallagher says that Belcher’s bet against subprime largely shielded his portfolio duringthe downturn.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 one happyclient who introduced them to the group,” said Sonnenfeldt.