True stories – like the star who spent $600,000 at Barney’s in a year – and a list of the 25 savviest financial pros who rein them in.
Not long ago, a celebrity client of entertainment business manager Evan Bell came to him with news of a girlfriend in London. This wouldn’t be terribly extraordinary except for the fact that the client already had a wife. Nevertheless, the celebrity wanted to know if it would be possible to set up separate bank accounts in Las Vegas and London so he could maintain two families. It was indeed possible, and Bell took care of the details.
“As far as I know, the two women still don’t know about each other,” says Bell, whose clientele includes top young stars like Amanda Seyfried and media types like Bill O’Reilly. “We don’t manage morality. We manage finances.”
It’s the job of Bell and other business managers in the entertainment community to make sure well-heeled stars are set up for life. This means working with others in an entertainer’s entourage of representatives, including agents and lawyers, to determine the star’s earnings projections. From there, business managers play point on a team of advisers and financial consultants who shelter millions of dollars in investments such as bonds, stocks and real estate. According to experts in the field, that accounts for about 80 percent of a client’s assets. The rest is more liquid, put in a bank account that often goes to support an entertainer’s lavish lifestyle.
“If you look at all the people who surround talent, most are focused on increasing revenue,” says Paul Feinstein, a financial adviser at UBS who, with partner Justin Demko, works with many business managers. “A business manager looks at that end, too, but is also focused on the risks a client is taking — what goes on with the budget. That role is critical in an entertainer’s life.”
Naturally, business managers — who are either on retainer, paid by commission or compensated with a flat fee — aren’t crazy about frivolous spending. Many are certified public accountants with a fiduciary responsibility to manage cash flow responsibly. Moreover, most top business managers know enough about the fickle ebbs and flows of show business to realize that just because a client is coming off a successful string of high-grossing pictures or hit TV shows, it doesn’t mean long-term success is guaranteed.
“Creative people are going to come up with creative ways to spend money,” says Alan Goldman, who manages a distinguished clientele at Los Angeles-based Goldman & Knell. “I can’t tell them not to spend money, but I try to get them to understand that Hollywood careers don’t last forever.”
To that end, business managers have unique strategies for steering clients in the right direction. Most financial pros will send their clients all kinds of reports regularly, sometimes weekly. Goldman says he was able to show one actor with a ferocious appetite for shopping at Barneys his wayward habits by tallying $600,000 worth of clothing spending in a single year. But often, that’s not enough.
Entertainers can be right-brained souls who are fabulously inventive but lack attentiveness to the kinds of details found on a P&L sheet. Some business managers must negotiate such handicaps by being a little creative in their own right.
Lester Knispel, a business manager who has handled money for such notorious spenders as Kim Kardashian, Courtney Love and Shaquille O’Neal, says that when money comes in, the first thing he does is set aside a good portion into a “tax account” so his clients don’t get the wrong idea about what they’ve got in the spending war chest. And Knispel loves life insurance. He pitches it to clients as the way to ensure their family’s well-being. But he also knows that making a client pay a heavy dose of insurance premiums is a good way to essentially trick them into socking away cash reserves because many policies allow holders to draw from them later in life.
Still, such strategies only go so far to rein in dollar drainage.
O’Neal is a world-class auto collector with dozens of cars. Now that he’s nearing the end of a Hall of Fame-caliber basketball career, Knispel says he is gearing up to have a conversation with the former Laker about gently applying the brakes to the fast life. “Let’s wind down that monthly nut,” he says, referring to Shaq’s expense ledger.
Such tough talk isn’t unusual for a business manager. All of them understand that some entertainers, besides having what pop psychologists might term an urge to splurge, are under intense social pressure. In an industry where image is everything and rich entertainers get hit upon to provide financial support for others, material pleasures and good-will spending can arguably be classified as status investments — much as business managers are loath to admit it.
On the other hand, it’s the job of the business manager to be the front guard against financial ruin, mitigating the risk of too much exposure to frivolous expenditures. Doing so takes real skill and a healthy knowledge of a client’s makeup.
Sometimes, business managers know more about what’s going on with the money than spouses do.
Business manager Martin Fox recalls a last-second call he got from one of his clients, who demanded that a particular car be bought and delivered with a big ribbon around it within a couple of hours to a restaurant. This entertainer had forgotten his wedding anniversary. Fox got the car delivered before dessert came.
“The next day, the wife comes to the office and says, ‘You have no idea what a wonderful husband I have,’ ” Fox says. “I’m thinking, ‘If you only knew.’ “