New venture consulting: Many new business ideas sound great but are doomed before they start. The multifamily office has to be able to work with athletes to evaluate the viability of new businesses. Moreover, this needs to be accomplished in the context of the athlete's overall financial situation. This also goes for licensing deals. On a related note, the way new ventures are structured should take into account asset protection goals and short- and long-term tax considerations.
International tax and related planning: Well-executed in-bound and outbound planning allows athletes to minimize taxes as they relocate or work in a different country-even if it's only temporary. To get the most out of this type of planning, it should dovetail with asset protection planning and family law issues. The multifamily office should also be able to address immigration matters for the athlete and his family.
Crisis management: When an athlete's life is racing along at 150 mph and hits a major speed bump-or a brick wall that has been reinforced with layers of tempered steel-the multifamily office can really prove its worth. Integrating and overseeing the family's security specialists and attorneys, coordinating public relations and helping to manage the athlete's emotional well-being are critical roles. Crises come in all shapes and sizes, so it's essential that the multifamily office executive has the required experts on speed dial and the processes in place to ensure smooth coordination.
Creating An MFO For Athletes
Establishing a multifamily office is actually quite easy. For the super rich, the family office is in many ways a virtual operation. It's rare to find the family lawyer, security specialist or other professional sitting at a desk in the family office. They're usually at their own firms, available as needed. This operational model makes the multifamily office highly cost effective and efficient.
By adopting a predominantly virtual multifamily business model, sports agents are able to bring top specialists to their athlete clients. For even the largest agencies, it's rarely, if ever, fiscally feasible to have a full staff of expert talent in-house. It's unlikely there would be enough business to justify keeping them as full-time employees.
Sports agents have to work through a number of issues in creating a multifamily office. First is the creation of a platform-the collection of services and products the multifamily office will provide professional athletes. Operationally, it's not really about the services and products as much as it's about the specialists. The conundrum is identifying experts who can work together in a meaningful way, with the sports agent taking the lead, on behalf of the athlete.
Sports agents sometimes see their multifamily office plans blow up in their faces because they can't manage the experts. Keep in mind that each specialist is generally looking to get business. This often results in them implicitly, or explicitly, denigrating the services of other professionals on their team. Another issue is the potential morass of making sure everyone is appropriately compensated. This gets more convoluted when experts are asked for their thoughts on client situations where they might not be paid.
Once the experts have been identified and the relationship has been papered up (including the compensation arrangements), the systems and processes upon which the multifamily office will operate are ready to be formally put in place. This encompasses everything from data collection to the development of possible solutions to the presentation of possibilities to implementation. It also includes explaining the multifamily office model to the athletes, including how it differs from the agency business. It's all a matter of setting up the office to meet the distinctive demands of the sports agent's clientele.
In practice, we find that all the pieces of a multifamily office geared to athletes come together "just in time." Predominantly virtual multifamily offices are not new. On the contrary, they're well-established business models. The ability to identify the appropriate expertise is also fairly straightforward. However, the compensation negotiations regularly prove to be more problematical, but certainly manageable. Keeping the whole venture on track is also challenging but well worth the effort for all involved.
Michael Dolan is president of AQ Consulting, a boutique firm that works with sports agents to support their efforts in creating multifamily offices for athletes. He can be reached at [email protected].
Lauren Hoard is a senior consultant at AQ Consulting specializing in structuring multifamily offices and developing compensation models.
Russ Alan Prince is editor-at-large of Private Wealth, a leading authority on the super-rich and author of The Family Office: Advising the Financial Elite (2010).