The unique nature of working with celebrity clients

Athletes and entertainers are just like everyone else — aside from complex tax issues, a lack of financial savvy and a need for prenups

Apr 24, 2018 @ 4:18 pm

By Jeff Benjamin

A few decades of working with celebrities and professional athletes has taught Jordan Waxman one thing: "They're no different than anyone else; they put their pants on one leg at a time."

Mr. Waxman, managing partner at HSW Advisors, has helped carve out a successful sports and entertainment group niche inside the $2.5 billion, New York-based financial planning firm.

While he recognizes several differences between working with athletes and entertainers, Mr. Waxman is well beyond being awestruck by his clients, whom he refuses to identify by name.

"These kinds of clients often need more planning help because they're usually less financially savvy," he said. "And they tend to delegate quite a bit, because they're used to having people run things for them."

Beyond some common quirks and characteristics of well-known people who often have to dodge autograph seekers, Mr. Waxman said a practice built around athletes and entertainers needs to specialize in the areas of tax management and legal protections, in addition to traditional asset management.

"We recognize that they have unique estate planning needs, and they also need asset protection strategies because they have bull's-eyes on their backs, often involving frivolous lawsuits," he said. "They have to worry about things like palimony suits being filed against them, and prenups are critical."

Things that most noncelebrities rarely have to think about can become a top priority for many of Mr. Waxman's clients.

"Tax mitigation is a major issue," he said. "These clients often get paid in many different jurisdictions, and they often make money through ordinary income, which is why they need to avail themselves of all the tax-differed vehicles available to them."

Mr. Waxman broke away from the Merrill Lynch Private Banking and Investment Group in 2012, along with HSW partners Kenneth Hoffman and Richard Steinberg, to become part of HighTower Advisors. At the time, the trio was managing $1.4 billion, including a fledgling celebrity niche practice.

Even though HSW has become known for its work with celebrities, the sports and entertainment group only represents about a quarter of the advisory firm's business.

The bulk of its clients are "entrepreneurs and serial entrepreneurs," Mr. Waxman said.

"I've been working with celebrity clients for about 20 years, but only in the last five years, since we became independent, did we decide to capitalize on it and put some resources behind this part of the business," he said. "And once we did, it really started to flourish."

Mr. Waxman said about 40 of the firm's clients are athletes or entertainers.

Although he realizes some advisers might have one or two celebrity clients, he doesn't recommend making a full commitment to the niche without understanding the space.

"You need to focus on what you can deliver to the client that is unique and distinguishable, and you need to research what it is these types of clients need and focus on that," he said. "If you're an interloper in this space, you're not going to do anybody any favors."

April Rudin, president and chief executive of The Rudin Group, a financial services marketing firm, warned that, despite the temptations, the celebrity market "is not for everyone, and you can't just enter that market."

"It requires specialized expertise because of things like contracts, unique incomes and other special issues related to celebrities," she said. "Athletes. for example, will have lump sums they come into and usually require payments to other agents."

Mr. Waxman said he entered the celebrity client space by happenstance several years ago when a high-profile money manager left the business to become a client and referred many of his clients to Mr. Waxman.

He cites an early experience in which an athlete client died in a plane crash, exposing the fact that the client had not been following Mr. Waxman's financial planning advice.

"When I found out he had not executed the plan we put together for him, I vowed to never let that happen again," said Mr. Waxman, who doggedly protects the identity of his clients, saying, "It's called private client services for a reason."

While athletes and entertainers are lumped into the same general category at HSW, Mr. Waxman said they actually constitute two unique subgroups of clients.

While both groups can make a lot of money, entertainers will be able to earn money well into their senior years. Athletes, though, often experience the sudden shock of having a lot of money, but relatively short professional careers.

"Sudden wealth is an issue if they can't learn to delay gratification," Mr. Waxman said.

Mr. Waxman has very little patience for clients who don't follow his financial planning guidelines.

"If we advise a client and they don't listen to us, we fire them as a client," he said. "Our mission is to make a massive impact that can last, and we can't do that if the client isn't following the plan."

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