Star Power

The problem with star power is its lack of staying power. Celebrities can be successful one day and unsuccessful the next. That unpredictability creates a challenge for the financial advisors and wealth planners who are charged with helping famous people achieve their financial goals.

It takes highly trained financial professionals with special expertise to help celebrities overcome the unique financial challenges they face. While there are thousands of private wealth practices that potentially have the capability to serve the financial needs of wealthy celebrities, a differentiated service offering that is solely focused on the sports and entertainment industry can make all the difference. Here are six elements that we have found to be critical when building a niche wealth management practice that serves the diverse and complex financial needs of celebrities.

1. Build a knowledge base around the celebrity's career-know your client
One of the best ways to earn the trust of this client base is to "speak the language" of the celebrity. Financial advisors need to be well versed in the contracts relating to a client's career. With each new contract, salaries can change drastically. A musical artist may face different financing needs before every concert tour. A pro athlete whose income is dependent on the excellent physical condition of his body may need changes in insurance coverage. By fully understanding such clients' financial circumstances and lifestyle, an advisor can anticipate and recommend solutions to their issues and challenges even before a problem occurs. Building this knowledge base-and continuing to stay abreast of the changes in the entertainment industry-is the first step to establishing trust and credibility with the client.

2. Offer unique financing options that meet the unpredictability of a celebrity's cash flow
Depending on your client's career path and specific contractual arrangements, have the flexibility to offer creative financing solutions. Celebrities often work in a feast or famine situation, and customized financing is frequently necessary to bridge the gap between payment cycles. Entertainment professionals may rely on your ability to lend against intellectual property and royalties-or to provide a short-term loan for an upcoming concert tour.

Established celebrities may require creative financing to support a lavish lifestyle. They often need a financial institution that will structure custom loans to finance a host of luxury items such as yachts, airplanes, race cars-maybe even a private island. When it comes to lending to these clients, know how to formulate effective strategies, negotiate terms on their behalf and structure the financing within the context of a sound financial plan.

3. Develop customized wealth management solutions that are designed to let today's income last beyond the lucrative earning years
Multi-million-dollar signing bonuses, hefty salaries and other lucrative financial incentives add up to a massive and sudden inflow of wealth for many young men and women who often have little or no financial experience. With highly profitable yet frequently short-lived careers, they face unique challenges when it comes to wealth management. For example, insurance needs abound, especially in the sports industry and tax bills can be daunting. Overspending is a common mistake many celebrities make, so debt must be carefully managed. As a financial advisor to wealthy celebrities, you can help them "survive" this burst of fame and fortune and emerge with a comfortable financial cushion that supports them throughout their working lives.

All too often, celebrities "live for the moment" and burn through their cash during their peak earning years. Instead of enjoying a long, comfortable retirement at a relatively young age, these shortsighted stars are forced to work well into their golden years just to manage their accumulated debt. Judicious trust and estate planning,* investment management and financial planning early in the celebrity's career can support a lavish lifestyle during peak earning years while offering the potential for a secure financial future later on.

* References to the term "estate planning" in this material may include:
(i) financial planning, multigenerational wealth planning, investment strategy
(ii) management of trust assets, investment management and trust administration
(iii) working with the client's legal and tax advisors in the implementation of an estate plan While clients' individual needs vary greatly, a few financial tips for nearly every highly paid celebrity may include:

Security measures also contribute to building trust and long-term loyalty with privacy- sensitive celebrities.

Insure their biggest asset (themselves):
Disability insurance is crucial for celebrities whose income depends on their physical health. It can prevent financial ruin in the event of an injury or untimely illness. If the unthinkable occurs, the insurance policy serves as a welcome safety cushion, enabling the client to transition to another career without loss of income.

Regardless of the client's youth, have an up-to-date estate plan.
Extensive travel combined with extensive physical activity exposes celebrities-particularly pro athletes-to a fair amount of risk. It's important for these professionals to have an estate plan that not only helps to reduce their heirs' tax burden, but also takes care of loved ones in the event of an unforeseen tragedy.

Maintain a sizable cash position.
Normally, it would be considered unusual (and perhaps unwise) for a person in his mid-20s to maintain a large cash allocation inside an investment portfolio. Celebrities, however, often need to remain nimble and liquid. An allocation of 30%-40% in cash may help to stabilize an uneven cash flow that often results from the sporadic nature in which many athletes and entertainers are paid.

Contribute to a retirement plan.
Managing the extensive tax burden is often one of the greatest financial challenges highly paid celebrities face. One simple way to help lower income taxes is to defer as much salary as possible through an investment in a qualified retirement plan. Of course, having a retirement savings plan is important for anyone, famous or not.

Build up a balanced investment portfolio.
Every successful celebrity with income in the multimillions needs an investment policy. Depending on the client's financial objectives, a portfolio that is invested in both municipal securities and growth-oriented taxable investments-a balanced portfolio-often works well. A well-balanced, actively managed portfolio helps alleviate the tax burden with less risk than an all growth portfolio, and can help the celebrity's wealth last well beyond the lucrative earning years.

4. Offer sound advice even before the wealth accumulates-become a trusted partner
Unlike the typical wealth management client, those in the sports and entertainment businesses often begin accumulating significant wealth at a very young age-and most of them have limited financial experience. As a trusted financial partner, take responsibility to educate your clients on financial matters early in their careers. Advise them on how to establish good spending, saving and borrowing habits-before their peak earning years begin. Help them get their first credit card. If you establish a trusting relationship early in a budding star's career, she is more likely to remember your firm when she needs professional wealth management services later on. If a celebrity credits your firm with the launch of his career because you were willing to take a chance on him, you have probably won his loyalty for life.

5. Offer complete confidentiality to shield private matters from the public eye
While celebrities typically enjoy the limelight, it is crucial to protect them from unwanted publicity when it comes to their financial matters. Confidentiality must be a top priority for any financial institution that serves this client base. Tight security measures also contribute to building trust and long-term loyalty with privacy sensitive celebrities.

6. Offer total access and availability to accommodate the celebrity's unpredictable lifestyle
Finally, make it easy to do business with your firm. Recognize the heavy demands of a celebrity's career and the unpredictable hours they keep. Service must be accessible at all times, whether via cell phone, e-mail, or in person. If your doors are always open, clients are more likely to walk through them

Conclusion
A star today is not necessarily a star tomorrow. Indeed, all A star today is not necessarily a star tomorrow. Indeed, all celebrities should have a financial plan to help set a course for managing and building wealth over a lifetime. Often, a professional financial advisor that understands the challenges faced by today's celebrities serves as a helpful resource throughout a star's career. Financial advisors who focus solely on celebrities can help these clients wisely manage daily cash flow and expenses, adequately save and invest for a comfortable retirement and appropriately protect their income earning potential. With intelligent planning that begins early on, celebrities can enjoy both a comfortable lifestyle throughout their working years, along with a secure financial future upon retirement.

Security measures also contribute to building trust and long-term loyalty with privacy- sensitive celebrities.

Thomas Carroll is managing director of the Sports and Entertainment Specialty Group of SunTrust Bank. He and his team have more than 20 years of experience working with well-known athletes and entertainers during their careers and in retirement. More information is available at www.suntrust.com/entertainment.