The economy might be chugging along, but Americans are in the end stages of the longest bull market in U.S. history, with interest rates on the rise, and almost daily external shocks being delivered by the White House. In this environment, where should smart Hollywood executives and talent be investing their money?
To find out, I created for THR three profiles: a 40-year-old male midlevel studio executive with a $3 million portfolio, a 50-year-old female studio boss with $25 million to invest and a 35-year-old male franchise star with $50 million in investable assets — and asked Hollywood's most experienced wealth managers to create an investment strategy suitable for each client. The tables outlining their portfolio calls are on the following pages, along with a handy average for the group.
To use this intelligence wisely, it should be noted that, in reality, investment advisers always tailor their client's portfolio to his or her specific needs and risk tolerance, adding factors like debt levels, overhead and life goals into investment decisions. For example, before William Broder, president at the management firm Freedman Broder & Co., dispenses investment advice, he first determines whether the client is married or single and/or supporting ex-spouses; if they have children heading to private schools and/or college; whether they own their home and other properties and, if so, the due date of their interest-rate term on their mortgage or mortgages. Even items like family medical issues and vacation plans can be factored in.
In other words, the following tables are not to be taken as gospel but are "model" moderate-level risk asset allocation recommendations that should solely be used as the basis for further discussion with a wealth manager about specific needs and goals.
Each profile has a backstory that mirrors real industry lifestyles. The 40-year-old male midlevel studio executive may have, for example, steady cash flow in the form of an annual salary and many years of productivity still ahead of him, but he probably also has young children in private school and is at that stage in life where he is trading up to a more substantial home.
Similar scenarios may apply to the 50-year-old female head of a studio, though college tuitions may be more what's in play. A veteran studio chief is also likely to be at the stage of thinking about devoting more time and energy to philanthropy — and having investment returns and stability to meet charitable goals and commitments would then guide her adviser's allocations.
In contrast, the 35-year-old franchise star might be sitting on a rich $50 million investment portfolio, but he doesn't necessarily know when his next series of projects with accompanying payday is coming, plus his wealth is built entirely on fleeting fame. The three clients have, in short, very different cash-flow issues — and anxieties.
Furthermore, an observant reader might notice that while Singer Burke (parent of SB Capital Management on our table) and Freedman Broder are well-known Hollywood management firms, the vast majority of wealth managers are heavyweight private banks, ranging from Hollywood's City National Bank to Wall Street's J.P. Morgan Chase. That's because most business managers in Hollywood use experienced third-party asset managers to invest their clients' money, and we have gone directly to the primary sources for our investment advice. Our tables roughly reflect the ratio between third-party outsourcing and in-house wealth management that exists in the real world of Tinseltown managers.
Lastly, while banks like City National find the vast majority of their Hollywood clients through managers, Citi Private Bank works mostly with clients directly. The bank's biggest entertainment clients, says Kush Malhotra, Citi Private Bank's market manager for the Western Region South, are mostly foreign talent who came across the bank while overseas, before they moved to Hollywood.