Who will manage rich people's money now?

Wall Street Journal
Robert Frank

Yesterday I talked with a wealth advisor who said her firm had hired a psychotherapist specializing in trauma and life shocks.

“For clients?” I asked.
“No for the advisors,” she said. “We’re getting screamed at and verbally abused every day by our clients. We need therapy.”
I was tempted to say: “Perhaps you need better advisors.” But in today’s markets even the best wealth managers are getting an earful from clients.
Clients are angry over the losses. They are angry at the bad financial advice. They are angry over the high fees, the product-pushing banks, the SEC, IRS and DOJ investigations and complex investments no one understood until they blew up. And they are tired of the revolving door of advisors due to mergers and turnover.
As I wrote in a recent post about the investor revolt, 81% of investors with $1 million or more in investable assets plan to take money away from their current advisor.
The question now is, where will the wealthy put their money next? How will the crisis reshape the business of wealth management?
It’s too early to tell. But here are possible scenarios for what the wealthy will do with their money:
SELF-HELP — Why pay someone else to lose your fortune when you can do it yourself? I’ve written before about the rise of wealth peering groups, where group of similarly wealthy people get together to swap financial information and advice. Now, interest is even greater. According to a recent Dow Jones article, interest has surged in wealth peering groups like Tiger 21, CCC Alliance and IPI.
FLIGHT TO QUALITY — Size isn’t always a virtue, especially in wealth management. But these days, some investors want to move their money to larger institutions for stability and breath of services.
SMALLER IS BETTER — A more likely outcome of the crisis is an acceleration of a trend that has been happening for over a decade — the rise of the little guys. These boutiques and multi-family offices, usually founded by exiles of the big firms, try to offer advice without products, more personalized service and less turnover in staff. The downside is that some of the firms may not be around in 10 or 20 years, and the wealthy want long-term stability with their advisors. But at a time when investors and wealth advisors are both becoming disillusioned with the big-bank-brokerage model of wealth management, the boutiques could become the biggest winners of the crisis.

http://blogs.wsj.com/wealth/2008/11/14/who-will-manage-rich-peoples-money-now/

The Dead, More Generous Than the Living in 2008

“Giving while living” became a mantra of philanthropy in recent years. Now, with the living running out of cash, it is the nonliving who are back in the lead as donors. According to Slate magazine and the Chronicle of Philanthropy, 7 of the top 10 charitable donors in 2008 were from estates. That is a big change from 2007, when all of the top 10 donors were alive when they made their gifts.

“In the 13 years we’ve published the Slate 60 list, this is the first time a majority of the top donors have come from estates,” said David Plotz, editor of Slate. “Regardless, we continue to be inspired by the charitable donations the list recognizes and hope our readers are, too.”
What gives? The rich, according to the Chronicle of Philanthropy, just aren’t giving the way they used to. Donors in the finance sector are a big reason: about a quarter of the top donors in 2008 came from the financial world. Next year will see even fewer donations of $100 million or more, experts say.
Nonfinancial donors also are paring back. Among those who have dropped off the list this year are Pierre and Pam Omidyar, T. Boone Pickens and Oprah.
The biggest donors in 2008 were:
1. Leona M. Helmsley (bequest), $5.2 billion

2. James LeVoy Sorenson (bequest), $4.5 billion

3. Peter G. Peterson and Joan Ganz Cooney, $1.02 billion

4. Harold Alfond (bequest), $360 million

5. Donald B. and Dorothy L. Stabler (bequest), $334.2 million

6. David G. And Suzanne Booth, $300 million

7. Frank C. Doble (bequest), $272 million

8. Robert and Catherine McDevitt (bequest), $250 million

9. Michael R. Bloomberg, $235 million

10. Dorothy Clarke Patterson (bequest), $225 million

Wealthy Investors Stage Revolt Against Advisors

Wall Street Journal
Nov 14, 2008 With investors getting clobbered by financial markets, it’s no surprise they’re blaming their financial advisors. But the wealthy aren’t just getting mad, they’re getting even — by pulling their money and moving it to different firms.

According to a new survey from Prince & Assoc., 81 percent of investors with $1 million or more in investible assets plan to take money away from their current advisor. An even larger number — 86% — plans to tell other investors to avoid their advisor. Only 2% plan to recommend their firm to other investors. That’s of critical importance, since wealthy investors often get investment advice from each other.
The irritation is especially high at the “brand” firms — large brokerages and banks. Fully 90% of clients of brand firms plan to take money away from their advisor and 70% plan to leave the advisor altogether. That compares with a mere 29% for the boutique, local advisory firms.
So what does this mean for investors and wealth-management firms? It could just mean a reshuffling of assets between branded firms, with big clients moving money from Merrill to U.S. Trust, or Lehman to Goldman. Or, more likely, it could accelerate the broader shift away from big-name advisors to smaller shops with fewer conflicts, lower turnover and more personalized service.
Wealth management firms argue that it’s not their fault, that they’re victims of the same extreme and unforeseeable market conditions that have wrecked even the most sophisticated managers. And blaming your wealth manager for a 770-point drop in the Dow is pointless.
Yet it’s not just the performance that has irritated wealthy investors. Of those clients whose investments returns this year were up against pre-determined benchmarks, fully half planned to take money away from their advisor.
In other words, bad service can’t overcome good numbers.

Keep an eye on this lad.

With ambition like this, he's going somewhere big someday!

6-year-old misses bus, takes family car, crashes
Jan 6, 2009
WICOMICO CHURCH, Va.
(AP) - A 6-year-old Virginia boy who missed his bus tried to drive to school in his family's sedan—and crashed.
State police say the boy suffered only minor injuries and authorities drove him to school after he was evaluated at a local hospital. Sgt. Tom Cunningham says the boy arrived shortly after lunch.
It happened around 7:40 a.m. Monday on Route 360, about 61 miles east of Richmond.
Police say the boy, who wasn't identified, missed the bus, took the keys to his family's 2005 Ford Taurus and drove 10 miles toward school while his mother was asleep.
He ran off the road several times before hitting an embankment and utility pole about a mile and a half from school.

Millionaires lose 30% of their fortunes

American millionaires have lost about a third of their wealth during the financial crisis, according to a new survey.

The study, by Spectrem Group, the Chicago-based wealth-research firm, found that households with a net worth of $1 million or more say their assets have declined 30% or more. Nearly one-fifth of millionaires have experienced declines of more than 40%.
Nearly all the millionaires surveyed (90%) fear a prolonged economic downturn. Altogether, they believe it will last for another 22 months, and more than half (55%) are concerned they will not have sufficient assets to maintain their present lifestyles.
“The current financial crisis has had a dramatic impact on America’s millionaires, reducing their net worth substantially and threatening their ability to maintain both lifestyles and retirement plans,” said Catherine S. McBreen, Managing Director of Spectrem Group.
Spectrem’s measure of household assets doesn’t include primary real-estate but does include other real-estate, which has dropped precipitously. But for the households in Middle and Upper Richistan, where houses account for a smaller share of net worth, investment losses have been the main wealth killer. Many of the wealthy are blaming their wealth advisers.
According to the Spectrem study, just 36% of millionaires feel their adviser performed well during the crisis and only 14% say they will increase their use of financial advisers in the future.

http://blogs.wsj.com/wealth/2009/01/06/millionaires-lose-30-of-their-fortunes/