Wealthy climb their own wall of worry

Dealing with financial loss is hard for anyone, but multiply the size of that loss by several squillion and the coping skills of the rich must be sorely stretched. How have they kept their sanity? JAMES THOMSON opens the case files.

By James Thomson

Dealing with financial loss is hard for anyone, but multiply the size of that loss by several squillion and the coping skills of the rich must be sorely stretched. How have they kept their sanity? We open the case files.

As the holiday season settles in, a sombre mood is descending on mansions from Melbourne to Mumbai, from Mayfair to Manhattan, from Monte Carlo to Moscow.

As we have documented throughout 2008, this has been an ugly year for the world’s wealthiest entrepreneurs. Tumbling share prices, lost bonuses, corporate collapses, plummeting house prices – the relentless bad news doesn’t just hurt a wealthy person’s corporeal self, it can damage their very psyche.

You probably don’t have much concern for the mental well-being for the rich – let them cry themselves to sleep on their giant pillows of money, I hear you say. But provision of specialist psychological services for wealthy investors has grown strongly over the last decade, in line with the entire wealth management industry.

Before 2007, the challenge for professionals working in this field was helping the wealthy deal with the enormous piles of money they had made, often extremely quickly.

In the last few months, the focus has switched to helping the rich cope with loss – of money, and identity.

Dr Hugh Joffe, a clinical psychologist based in the leafy Sydney suburb of Vaucluse, regularly consults to wealthy individuals.

He says the speed with which the downturn has torn through global financial markets has been, for many of his wealthy clients, particularly hard to deal with. After 15 years of watching the economy grow and their fortunes rise, Joffe’s clients have been forced to face up to a new reality.

“People had an illusion of certainty, and that’s all been taken away,” Joffe says.

While sweeping generalisations about the inner workings of a group of people’s minds are dangerous, it’s pretty safe to say that most entrepreneurs are extremely driven people.

While money might not be their primary driver – the thrill of building a business or leading a team or creating new product may motivate certain individuals – the size of your fortune does provide a basic measure of success. And besides, the notion of wealth remains closely tied to power, security, freedom, success, prestige and, for many people, happiness.

So how are the wealthy dealing with the psychological scarring from this downturn?

Psychologists and therapists are one way to go, but an increasingly popular option for high-net worth individuals in the United States is “wealth peering” – a sort of group therapy for the rich that has been compared with Alcoholics Anonymous.

There are several organisations running wealth peering in the US, including Tiger 21, CCC Alliance and Family Office Exchange. Laird Pendleton, co-founder of CCC Alliance, told Dow Jones recently that the level of interest from prospective members during the past two months has been two to three times greater than usual.

Tiger 21, which describes itself as the premier wealth peering organisation in America, has 170 members who meet in 10 to 12 person groups. Membership fees are $44,000 a year and members must have at least $US10 million to gain admission. Tiger 21 has seven offices across the US and plans for six more next year. The organisation even claims to have fielded inquiries from Australia in recent months.

The peer-to-peer groups usually meet once a month and are also able to attend special presentations on investing, lifestyle, family and economics. More recently Tiger 21 has started holding bi-weekly conference calls for members, to discuss issues such as the state of the hedge fund market, the best places to park cash in the falling market and the potential impact of threats to hedge funds.

Tiger 21 co-founder and chairman Michael Sonnenfeldt says the conference calls have quickly become the most popular venue for members, with 50 to 70 members sharing their informed financial crisis views and experiences.

“This has been especially helpful at the time when most high net worth individuals are evaluating their portfolios and those who manage them,” he says. “These calls, along with our private web forums, and the monthly meetings, are often the only places where are our members can come for unbiased advice – advice from peers with the sole agenda of sharing personal insights and knowledge – and even opportunities.”

Another thing that makes Tiger 21 unique is the once-a-year “portfolio defence” sessions that each member is required to go through. The sessions involve the member presenting the personal investment portfolios to the group for an in-depth review.

“Financial results are presented in writing, and the presenting member will need to “defend” the stated objectives and demonstrate how the portfolio’s composition and performance reflect these objectives,” the Tiger 21 website says.

The idea is the member can then “harness the collective intelligence of the group by identifying potential problems or opportunities”.

Given the extraordinary events of the last year, it’s a fair bet that these portfolio defence sessions would involve a fair deal of collective soul-searching.