The following is an excerpt from Laura Rowley | First Published on November 2, 2011 | DailyFinance.com |
Like many Americans, Al Checchi is fed up with Wall Street. But the 63-year-old isn’t joining the protestors at Occupy Wall Street. Checchi is a multimillionaire. His beef is with the institutions that he chose to manage money for him, assuming the returns they’d achieve would at least keep pace with the broader market averages. That isn’t what happened.
“I won’t name names, but I invested with all the usual suspects — name-brand investment banks and commercial banks, hedge funds, private equity and venture capital funds,” says Checchi, who retired a few years ago after a career that included top positions with Marriott (MAR), the Bass brothers, Walt Disney (DIS) and Northwest Airlines (DAL), where he engineered a leveraged buyout and served as chairman. “I assumed they were professional. I was appalled.”
The loss of faith in the professionals on Wall Street is a sentiment that has reverberated across the American investment landscape since 2008, amid mounting criminal convictions and civil fines for insider trading, and fraudulent marketing. Monday’s bankruptcy filing by MF Global and the news of discrepancies in its books have only added to investor concerns.
But what’s unique about Checchi’s story is that he is willing to openly discuss what few wealthy investors will admit: Scandals aside, much of the harm caused to portfolios comes from standard operating procedures in the industry, practices Al Checchi calls “the difference between being a fiduciary and being predatory.”
Checchi’s story begins after he retired, when he asked his son Adam, a Harvard-educated computer science major and MBA, to analyze the family fortune, which Forbes listed at $600 million in 1997. (The Checchis wouldn’t reveal the portfolio’s current value.)
“I did the analysis on it and I was horrified,” Adam says. “When I compared where they started and the money they put in relative to owning a basic index of stocks and bonds, they were far below that.”
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