Three Hours in the Financial Hotseat

How would you like to have your finances reviewed by eight wealthy men? They'd look over all your statements, investments, etc., then ask you some questions and offer their advice. It would probably be something you'd appreciate, right?

Well, yes and no. "Yes" because it's great to have someone who knows something about money offer their thoughts on how you could do better. "No" because the process can be pretty brutal.

That's what a NY Times reporter recently found out when his finances got reviewed by eight members of an investment club called Tiger 21. The club is made up of 180 members who have a net worth of at least $10 million. They also pay $30,000 in annual membership fees and commit to spending one day a month with other members. In other words, these people are loaded, knowledgeable about finances, and are serious about their money.

The reporter went in thinking he we doing a pretty good job. But the group raked him over the coals on life and disability insurance, owning a vacation condo, cutting expenses, and managing his investments. In the end, he got a lot of good advice, but he didn't enjoy the process. ;-)

A few things crossed my mind as I read the piece. In particular:

• Overall, it's a pretty fascinating read -- the fact that this group exists and how they operate. Check it out if you have time at the link above.


• I think I'm doing ok as well, but I can't help think that they'd find holes in my finances too. I wonder if they'd let me sit through a three-hour "torture session." ;-)


• What about the idea of doing this with a group of acquaintances? Perhaps getting together five to ten people you know who are doing well with their money and agree to meet every so often to review each other's finances. Does anyone do something like this? Does anyone find the suggestion worthwhile?


• We kind of do this as a group here at FMF as we review and comment on all sorts of financial issues and learn new things from each other. In particular the Reader Profiles and Help a Reader series really get to the point -- commenting on people's financial situations and giving them suggestions to consider (BTW, I'm in need of new Reader Profile participants. If you're interested in telling your financial story, please drop me a line.)


• I personally don't have anyone who knows/reviews/contributes into my finances like these guys do. Sure, I have several individuals that I talk about personal finances with, but nothing this in depth. Perhaps I should look at starting my own group. The key: do I know ten people who are doing well financially? (It's a sad question to ask/answer.)

Anyone else have any thoughts on this issue?

Comments

[Marty]

I think I would like it and also not like it. On one hand it would be great having someone who really knows what they are talking about, but it could hurt in the sense that I thik I am doing pretty good. I would like to know how I am doing though.

[everyday tips]

I can say that I honestly do not know ten people that manage their finances particularly well, which is actually kind of depressing.

I can imagine that would be a very stressful process. These people are obviously very successful and know more than more of us when it comes to finances (I imagine...). I might question why they pay 30k to be in this club, but maybe the connections and whatever else the club provides gives a high rate of return on that investment?

[bobsmith]

If anyone is willing to spend $30K to be in this club, I don't want thier advice.

[Mike B.]

I am really surprised about the disability insurance advice. A writer needing a big disability policy? Do these guys all own insurance stocks or what? If you end up on LTD, your lifestyle is hosed no matter what. Getting 60% of your income for doing nothing seems sufficient. Especially when you are a writer! What kind of disability is going to render him unable to write? That is some questionable advice, IMO.

[mdb]

@ Mike B

The 60% figure maybe taxed. If the employer pays the benefit, it is taxed, if the employee pays the benefit it is treated like insurance and not taxed. I never understood why any employer would pay for LTD insurance, ultimately it would be better for every employee to be able to purchase it themselves through an employer group plan.

[DIY Investor]

I think it is worthwhile to form such a group. Many times for advisors it is difficult to be blunt. There are many people out there who will be eating dog food if they aren't willing to sit down and think a little bit about their future financial situation. There are many who saw their house as their retirement vehicle who got a rude awakening. A group like that mentioned could give a blunt assessment that many times is difficult for an advisor, especially if they are trying to get a new account.

[Mike Hunt]

FMF,

You probably have an idea of what these guys are going to tell you. I know what they would poke holes at when looking at my situation, but I think I can defend each point they would raise.

If you take the time to review your own financial house thoroughly first and justify the decisions you've made then you will be quite ready for this 'inquisition' and it will become a more valuable exercise. It seems like the author of this was caught by surprise so couldn't get as much value as if he was more prepared.

-Mike

[DIY Investor]

I think it is most useful for people who are not well versed in personal finance - for example, business people whose main focus is on running their business. I know plenty of doctors who could use a brutal assessment of their financial situation.

[Dee]

It was a good read. I am a bit surprised by the 15 percent savings figure. That seems a bit low, though I guess what's more important is how much in dollars that is, not the percentage.

I think something like that would be helpful if you come into it, not ready to defend yourself, but ready to question your choices.

[Bad_Brad]

The important thing to remember from this column is that personal financial advice is never a "one size fits all" sort of thing. The writer of the article has a condo in Florida that all the people in the club want him to get rid of. Maybe the writer already knows that it is not financially optimal to have the condo but he likes having the condo anyway? And if his finances are in order and he can afford it, why not?

[Money Beagle]

That's pretty interesting. I know that there are things that I could be doing better and that many financial advisors would have a field day with. But as Brad said, each person has their own needs and wants and situation, and I doubt anybody in the world hits a home run every time when it comes to personal finance.

[Andrew]

"Perhaps most important, none of the members became rich by eating out less. They became rich by working in industries that paid extremely well or by building businesses that they later sold."

So, everyone, just go work on Wall Street or start that business with the extra capital from your trust fund.

I dated a girl who was an assistant for Tiger 21. It made sick to see how these folks (including the girl I was dating at the time) thought about money. There was nothing in this club about giving back; it was all about protecting "me."

This, my friends, is the problem with our country.

[Rick Francis]

>What about the idea of doing this with a group of acquaintances? Perhaps >getting together five to ten people you know who are doing well with their >money and agree to meet every so often to review each other's finances. Does >anyone do something like this? Does anyone find the suggestion worthwhile?

I thought that would be a worthwhile suggestion, but it would be pretty difficult to organize from scratch:
First how do I know who is really doing well with their money? My friends don't share their tax returns or brokerage statements, so even if it appears they are doing well I don't really know if they are living beyond their means.
Second, I think it would be very hard to get people interested in participating in the hot seat. It is very socially awkward to talk that openly about money- I don't think it should be but the reality is that it is…. Do you know all the details of your parent’s finances?
The only way that I can see this possibly working is if a pre-existing organization that centers on finances, like an investment club, did it as a sideline.

-Rick Francis