Business Manager's Advice for Stars to Deflect Money-Hungry Relatives (Guest Column)
Hollywood success can breed "loan" after "loan," but a top business manager reveals a "tough love" strategy -- and says don't be afraid to evict a family member.
This story first appeared in the Oct. 11 issue of The Hollywood Reporter magazine.
Success in Hollywood often leads to people who are not accustomed to having money all of a sudden having far more than they know what to do with. As someone who provides financial guidance to many of these people, I often end up dealing with family situations that can become awkward.
The most common family transactions are loaning relatives money, taking a first or second mortgage on a home and co-signing a note. But let's say the relative of a successful actor finds a real estate investment property requiring capital funding. And let's say the client's relative wants to become the primary tenant. I have a serious discussion with the client to inform him that he must be prepared for an endless stream of outgoing cash in the event that the "tenant" is unable to make payments. The client might even have to evict a relative. Is he prepared for that? Tensions can escalate when a family member continually comes back for "loan" after "loan," failing to offer any kind of repayment plan.
Many of my clients reap the rewards of their hard work with a sudden, huge leap in their income -- and that's when the distant relatives suddenly appear. This is an ideal opportunity for me to display my expertise as the "Black Hat." I remove the family tension by insisting that my client refuses to discuss money with any relative. Instead, he hands the relative my card and lets them know that he or she should communicate with me and only me. If the relative contacts me, I am able to unequivocally say "no," no matter how insistent or manipulative he may be. Calm yet firm, I have nearly a 100 percent success rate resolving what could turn out to be a messy financial risk, exacerbated by possible negative publicity exposure.
In a reverse scenario, many of my younger clients have their financial affairs managed by their parents. But once they reach a certain level of success, their needs and cash management become significantly more complex. Often parents resist or have difficulty stepping down from their child's financial management. Surely they were able to oversee everything when their child was younger, but they don't have the professional expertise to navigate cash-flow management, loan-out corporations, tax protections and investment counseling.
So I encourage parents to turn over their financial affairs to me. Mostly they know this can be the greatest act of love. But a small percentage of parents will not let go. In those situations, I stand on the sideline, waiting to be called back in. And I almost always am.
The combination of sudden wealth mixed with emotional family dynamics can be very taxing. No one wants to evict a mother. As their adviser and protector, I might come off sounding like "tough love," occasionally ruffling feathers and encountering hurt feelings, but my obligation is to prevent ruined relationships -- even when it's more intricate than formulating a successful investment strategy.
Evan Bell is managing partner of Bell & Co., a New York-based business management firm.