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Saturday, June 18, 2011

How Would You Do in the Financial Hot Seat?

Tiger 21 is an elite investment club comprised of members with a net worth of at least $10 million, described by Paul Sullivan in "Financial Advice Gleaned From a Day in the Hot Seat", New York Times. They engage in a process referred to as "the portfolio defense," which in actuality is a wide-ranging frank appraisal of life style, finances, etc. Michael Sonnenfeldt, the founder, refers to the "hot seat" process as "carefrontation."

New York Times
columnist Paul Sullivan sat in the hot seat and was told his family needed to rethink the spending issue and that they fell short of life insurance and disability insurance needs. The advice also pointed out the need for more liquidity that should be achieved by selling a Florida condominium.

A couple of thoughts occurred to me as I read the article. First off, it is difficult, many times, to be frank with potential clients. If only they could see their financial advisor pore over the account statements and initially get a picture of their financial positioning. Sometimes, the advisor just wants to scream. All of this typically gets watered down when we meet with the client. The brutal frankness of the Tiger 21 group was refreshing in this regard.

Secondly, it has always occurred to me that financial planners have different points of interest, expertise, and emphasis. Some are tax experts, some are great at budgeting, and others are expert at investments. The fact of the matter is that if you go to 3 different planners/investment managers, you'll many times come away with 3 very different approaches. The idea of bringing different consultants to the table at the same time to provide thoughts and advice seemed to me to be very valuable, in that they can play off of each other's thoughts and advice.

It would be valuable, I would think, if a similar group was available for average Americans to go in front of to receive financial advice - a group where not one firm's philosophy or approach was presented but, in fact, the viewpoints of several professionals. Too often, advice is tailored to products the advisor is selling either directly or indirectly.

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