Celebrities are the types of clients many advisors only dream of working with. At one firm, these clients -- and the advisors who serve them -- are getting increased attention.
A new division at Morgan Stanley supports nearly 70 advisors around the country in working with celebrities and athletes. Opened late last month, the unit works with participants helping ensure they understand the impact that such sudden and public wealth can have on these clients.
From athletes and entertainers to those that support their effort on the sidelines and behind the scenes, many of our clients are benefactors of sudden, overnight wealth, says Drew Hawkins, managing director of the new division at Morgan.
Many havent experienced this magnitude of wealth," Hawkins adds, "So as advisors, we need to let them know the dos and donts and be part of a team structure to serve them.
According to Hawkins, here are some of the ways that advisors who work with celebrity clients can help:
- Be careful of clients getting too comfortable with money. Many celebrities and athletes think their sports or singing careers will last forever, and they make huge purchases upfront. Advisors should warn them against that and should study how celebrity clients are compensated. Celebrities often think theyll be guaranteed to have revenue for a long time, irrespective of how their contract is structured.
- Have good company. Advisors must encourage celebrity clients to surround themselves with smart people who support them.
- Dont be blindly generous. From a savings and budgeting perspective, many celebrities and athletes feel obligated to take care of finances they dont have to deal with.
- Be skeptical. Celebrity clients are often approached daily by people they dont know. They are also often approached by various get rich quick schemes, which rarely pan out. Advisors should encourage clients to have a process in place to make sure these opportunities are properly vetted.
Chat Reynders, CEO of Boston-based Reynders, McVeigh Capital Management, an advisory firm that manages $1.1 billion in assets and advises on an additional $4.5 billion for trust departments across the country, says he helps the celebrity clients he works with learn how to limit gifts.
Ultrahigh-net-worth individuals and celebrities face an unusually complex set of challenges because their wealth is seen by a wide community, he says. The biggest problem is that some of our clients are so well known by family and friends that they have a hard time limiting gifts.
If theyre a target of philanthropy," Reynders explains, "we take on the responsibility for judging if and how any potential gift fits within guidelines that the client has articulated with us."
Additionally, advisors with celebrity clients often deal with clients who have a foundation thats not in their name. Reynders says part of his job is helping his clients discover organizations theyre excited and passionate about, so that he can help specify the limits of their funds they can give out. A lot of our work is about having the conversation to make what theyre doing intentional, he says, noting that celebrity clients have a persona, and usually just dont want to be labeled a bad guy.
If theyre intentional with how they manage money and relationships, they can avoid the messiness that comes with cousins coming at you for money, for example. It happens far more often than youd imagine, he says.
Let us know if you're an advisor related to a celebrity, or know one who is by writing to firstname.lastname@example.org.