‘Tiger’ on the prowl for HNW clients

The U.S.-based Tiger 21 positions itself as a premier peer-to-peer learning group for high-net worth investors. Headquartered in New York City, the club’s U.S. membership is 140, who currently manage approximately $10 billion in assets.

Its Canadian chapters in Toronto, Montreal, Vancouver and Calgary will soon be serving our homegrown HNWIs — each of whom must have investable assets of at least $10 million. Annual membership to Tiger 21 is a princely $30,000 a year.

At the core of the club’s business proposition lies the promise of helping members build the skill set to successfully transition from focused entrepreneurs to disciplined managers of wealth. And it does so by organizing professionally facilitated monthly member meets that tap into their collective expertise and intelligence.

No doubt peer-to-peer meetings can generate new ideas. But they also have the potential to breed doubt about some of their advisors’ intentions and competence. That being the case, how could the club impact the business of financial advisors and the role they play in their clients’ financial well-being?

“Tiger 21, as currently formatted, is too small, too expensive, and too unproven to be considered a risk to advisors at this point,” says Mike Macdonald, vice-president, consulting, Weigh House Investor Services.

The club’s value proposition is in networking with investors with similar issues rather than presentations on investment strategy, he says.

The club’s president, Jonathan Kempner, is all too cautious about such comparisons and asserts that the word “invigorating” best captures the typical member reaction.

“Most Tiger 21 members view their membership as one of the most fulfilling and productive learning experiences of their adult life,” says Kempner. “The insights and discussions which permeate throughout the organization have a profound impact on members’ financial and personal lives.”

He further dismisses any suggestion of competition between the club and advisors, saying the two share a terrific relationship in the U.S. “In fact, the most competent wealth advisors have seen their business increase substantially as a direct result of being connected to Tiger 21 and being recommended by members to one another,” he says.

Richard Knowles of R. Knowles & Associates in Vancouver, seems to be of the same opinion. At least as far as the club’s impact on advisors goes.

“One key advisor that creates and gets referred in the club would profit more, for example, so getting the position as a good advisor to high-net worth clients is valuable as it often works on referral,” says Knowles.

The club finds a guarded endorsement from Macdonald, too. “We would support any group that helps educate investors.” His advice, however, to the club about making concrete recommendations is “steer clear of providing advice on specific securities unless licensed to do so.”

Although the advisor community at large remains unfazed by the club’s presence, there does exist a reluctant admission that a club like this may drive out the weaker advisors from an already competitive marketplace. “Tiger 21 is a threat to advisors who are not taking the time to understand their investor’s current needs or concerns,” says Macdonald.

He suggests a bigger risk to a greater number of advisors will come from similar clubs being formed by the mass affluent.

Sitting around and swapping ideas with a group of friends in the same social strata is not a novel experience for HNW clients. Kempner knows that, but insists that the exchange of issues and ideas at such social settings is not the same as Tiger 21’s disciplined, confidential meeting experience. “It is like comparing a neighbourhood book club with a comprehensive college experience at a first rate university.”

With a matching number of HNWIs, each holding more than $10 million in assets, is the Canadian market really able to sustain this club’s cost? Kempner certainly thinks so.

“Vancouver, Calgary, Montreal and Toronto are just as sophisticated, financially and otherwise, as any American city,” he says. “By extending the Tiger 21 brand and experience into Canada, we are confident that we will be able to allow Canadian-based members to enjoy the same significant financial and personal learning opportunities as their American counterparts.”

The cost of membership is amply covered by the rewards of collective intelligence among peers, he says.

Macdonald has his reservations about the cost. “Investors can currently get professional monitoring services for far less than the Tiger 21 fee, which would very likely provide a more professional sounding board than Tiger 21,” he says. “Wealthy investors such as those that would be attracted to Tiger 21 have likely had several managers and have a good idea on what value propositions make sense.”

As advisors know all-too-well, the subject of fees and costs can be particularly sensitive. Most tend to bring it up as early as possible.

“I am open and transparent about fees and I tell my clients how my compensation structures work and what options are available,” says Curt Hanselmann, a Financial Advisor in Calgary. “I never miss an opportunity to put the question out to my clients of my value. There is nothing wrong with an advisor getting paid for his/her work and his expertise, as long as his clients understand how much they are ‘paying’ him and can judge for themselves whether he is worth the cost.”

While on the subject of costs, group chats among HNWIs can, perhaps by default if not by design, raise concerns over an advisors’ integrity. Is it time then for advisors to face uneasy questions about keeping clients in high-fee structure and charging transaction fees that seem a bit over the odds?

“The majority of high-net worth people will not be overly concerned with such trivialities with a good qualified and results oriented advisor,” says Knowles. “If truly financially well-off, the marginal cheap difference between one firm trade fees to another is negligible if there is an advisor with a trust relationship, excellent consistent results and offers great advise on tax, legal, insurance and other more important issues.”

As for the future of Tiger 21, it is already a roaring success in the U.S and there’s little to suggest it will be tamed in Canada.

(08/03/2010)