LOS ANGELES — In most of the country, wealth managers deal directly with their clients.
LOS ANGELES — In most of the country, wealth managers deal directly with their clients.
But in Los Angeles, wealth managers hoping to land a big-name entertainer as a client typically must go through a business manager.
“[Wealth managers] need us badly,” said business manager Howard Altman, a partner with West Beverly Hills, Calif.-based Grant Tani Barash & Altman LLC. “We’re the financial gatekeepers.”
Business managers say they act as executors and administrators, and are responsible for everything from paying bills and doing accounting work to dealing with landscapers and handling disputes with merchants.
Holistic strategy
For their show business clients, business managers are very much like multifamily offices, said Julie Miller, a partner with Holthouse Carlin & Van Trigt LLP in nearby Santa Monica, Calif.
“It’s almost the same,” she said. “We tend to take care of all aspects of a client’s financial life, from cash flow to tax, estate and investment planning.”
Lester Knispel, president of Woodland Hills, Calif.-based Boulevard Management, said that his firm even hand delivers a “cash allowance” to its clients’ home.
Unlike wealth managers or multi- family offices, which traditionally charge clients a fee based on a percentage of assets under management or advisement, business managers tend to charge a retainer fee on a monthly, quarterly or annual basis, a project fee or a fee based on a percentage of a client’s income.
When selecting a wealth manager as an investment adviser or, more likely, as an asset manager for their clients, business managers say they apply a rigorous screening process.
“Every wealth manager is really good at pitching,” Mr. Knispel said, “but they have to show me they can do what they say they’re going to do before we reach a level of comfort.”
Ms. Miller said that her firm interviews at least two or three wealth managers and makes sure they meet with her client so the client can “look them in the eye.”
Once a wealth manager is chosen, business managers say, they usually work with them closely, designing an asset allocation model based on their client’s risk tolerance and needs and then monitoring the performance of the portfolio under management.
Business and wealth mangers describe their relationship as cooperative, but the balance of power is clearly tilted toward the business manager.
“[Business managers] really relish control,” said Michael Casey, president and chief executive of South Pasadena, Calif.-based Whittier Trust Co. “They’re very paranoid about others getting their noses under the tent flap. It’s a high-maintenance hurdle for wealth managers.”
“There’s a lot of baby-sitting and hand-holding,” said an industry executive familiar with the Los Angeles market, who asked not to be identified. “It can be a huge pain in the ass for wealth managers.”
What’s more, say wealth managers, if a big client leaves a business manager, the wealth manager is likely to lose the client, as well.
But in a relationship business, wealth managers also can benefit handsomely from working closely — and successfully — with entertainers and their business managers.
“Entertainers like to be taken care of more than others. They demand it, and they get it,” said Todd Morgan, senior managing director of Los Angeles-based Bel Air Investment Advisors LLC, who counts Barbra Streisand among his ultrahigh-net-worth clients. “But if you do a good job for them, they’ll bring you other [entertainers]. They’re very good about that.”
Both business and wealth managers agree that — perhaps surprisingly — successful and wealthy entertainers tend to be conservative investors.
“They know they’re in a business where no matter how well they’ve done, they may not work for five years,” Ms. Miller explained.
In addition, unlike a wealthy entrepreneur or corporate executive, creative entertainers don’t have to be familiar with business or the financial markets to make their money.
“They may not be comfortable with finances, because they haven’t had to have a good understanding of it in their business,” said Mr. Altman, whose firm is owned by Wilmington (Del.) Trust Corp.
“Many are more interested in protecting their wealth than growing it,” he added, observing that since entertainers expect to increase their wealth through working, there is no reason to assume a lot of risk.
Comedians tend to ask the most perceptive questions about financial investments, said James Berliner, president of Los Angeles-based Westmount Asset Management Inc.
“They’re so in touch with reality, because that’s the basis of comedy,” he said. “They read the paper.”
Blended strategy
Although most business managers don’t invest their clients’ money in the financial markets themselves, some firms, such as Los Angeles-based Quintile Wealth Management LLC, consider themselves both business and wealth managers.
Quintile is a “somewhat unusual model,” acknowledged Kenneth Anderson, a partner with the firm, but one that he believes will become more commonplace in the future.
As more wealth managers enter the Los Angeles market and realize the importance of business managers, Mr. Altman advises them to be patient.
“The new guy isn’t going to get the business on the first day,” he said. “We have to see the quality and uniqueness of their product. We have to monitor their performance and engage in a regular dialogue. We’re picking a specific product and service, but ultimately we’re looking for a partner who shares our philosophy of what’s best for the client.”
Ms. Miller said that her firm will drop a wealth manager if they change their business model or “take their eye off the ball.”
And a “mortal sin” in Hollywood, she said, is if an entertainer “sees their name in an article about a wealth manager without their permission. In this business, it’s all about discretion.”
For other stories in the Wealth Management Market Reports series, click here.
