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Poor Little Rich Men

Poor Little Rich Men

cover0109.gifNew York magazine has an interesting "opinion" story about the meaning of the recent "bail out" of Jon Winkelried, Goldman Sachs’ co–chief operating officer. (In short, the meaning is: Even rich Wall Streeters, who should know how to plan, are hurting for cash.) You remember Winkelreid? He is the rodeo-loving Goldman executive who retired from Goldman on March 31 after making boatloads of money at Goldman over a 26-year career. It seems that Winkelreid, though wealthy beyond most people's dreams, faced a short-term liquidity crunch. (Selling any of his more than 2.7 million shares in Goldman would have been, er, awkward, in that it might have spooked investors who follow insider sales filings.)

New York magazine, in a story entitled, "Broke Bankers," paints a picture of Winkelreid as a wealthy financier who was guilty of, if not bad financial planning, overly optimistic planning. In short, to fund his wealthy lifestyle (a Colorado ranch, a Nantucket home and a yen for cattle and horses), he was forced to sell some of his interest in Goldman funds to Goldman for some liquidity. (That's what many are saying, anyway, that it was a liquidity crunch after his Nantucket house didn't sell.) Of course, there may be more to the story about Winkelreid, who retired at the age of 49. Winkelreid made no comment to the press that reported on the transaction.

Not that this is proof of Winkelreid's cashcrunch, but we have seen similar problems in the retail financial advisory space. In January, our cover story, "Reality Bites," we noted that a precipitous drop in the stock market caused a precipitous drop in financial advisories' assets under management that in turn caused a precipitous drop in advisors' revenue.

"It is difficult to estimate what percentage of the industry is suffering from some form of financial stress since the affected firms are not prone to disclosing the issue," said Philip Palaveev, who has advised scores and scores of financial advisors over the years as a consultant. "If I had to venture an estimate, I would say that at least 30 percent of all advisors are facing personal financial issues that require them to significantly change their lifestyles or borrow money to maintain [them]."

We'll venture that many advisors should tell their clients, "Do as I say, not as I do."

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