What can I learn from business managers of celebrities that will help protect my wealth?
“Creative freedom and the need to control costs are eternally locked in a Vulcan death match.”
That quote, from Donald S. Passman’s book All You Need to Know About the Music Business, succinctly summarizes the push and pull between the immense fortune that musical talent—as well as sports and acting talent—can suddenly produce and the impulses these gifted individuals often have to spend those fortunes.
Think about the college quarterback who in his junior year is drafted in the top 10 and becomes part of an NFL roster the following fall. Or think of a musician who in a matter of months goes from playing small clubs to being the musical guest on Saturday Night Live. And it’s not only musical, athletic and acting stars who become wealthy overnight.
Consider, too, a wealthy patriarch who passes unexpectedly, leaving behind a spouse or children with limited knowledge of their new fortune and how to manage it. Then there are “solopreneurs,” those highly successful professionals—architects, lawyers, C-suite executives—who’ve decided to go it alone. They may be experts in their fields but have never operated a business.
What these stars and professionals have in common is that they excel at what they do and get handsomely rewarded for it. But too often, they also lack the full knowledge to protect and grow that newfound wealth. They need protection, guidance, counsel, someone who can say, “No, that’s not a good idea.”
In short, suddenly wealthy people need people like us: That is, a business manager. To use a sports analogy, think of us as their offensive coordinator. Our clients make the plays, perform at the venues, come up with the “big idea” for a business. What we do is minimize their risk and exposure, and make sure, through proactive tax and cash-flow planning, that they keep as much of their money as possible.
For example, a band, pro athlete or product designer may be based in one state. But when any of them does a national or international tour, plays through a season or ships a product around the world, money is made in multiple locations. Meaning separate tax returns will have to be filed for each location. All will need live, real-time accounting and planning help to stay ahead of the curve. And they’ll need us all year long.
In general, to work effectively with artists, athletes and entrepreneurs, we need to go deep. We do that by knowing everything about their finances, often as much as they do. We get involved in nearly every aspect of their lives, going well beyond discouraging outlandish purchases. We educate them about the consequences of all decisions.
What can a typical client learn from what we do? He or she can expect the range of services a star would enjoy. For, as that client’s “coordinator,” we do just that—coordinate the efforts of those doing the advising, from financial planners and insurance specialists to attorneys. And we make sure those professionals’ combined efforts work in the best interests of the client.
Also, based on that client’s needs, we involve our firm’s estate-planning group or our international offices. If the client wants to form a foundation or trust, we coordinate with our groups that handle those issues.
Circling back to Don Passman’s quote, to avoid that Vulcan-like struggle, yes, we must help our clients control costs, but also coordinate the efforts of those around them and have a plan. We have occupied this advising niche since people played 45 rpm records. And we can assure you that being business managers to the stars has never stopped being entertaining.