Business leaders are more critical than ever in the entertainment industry – and perhaps that is why they are more under scrutiny today than at any time in the history of their profession.
Artists and celebrities are no longer just “rich”; they have real eight- or nine-figure (or more) wealth, invested in multiple ways to keep making money, whether their careers soar or crash.
To them, business leaders are a kind of financial quarterback, the individual who pays their mortgages, bills and taxes, outsources their investments to wealth advisers, and manages their life efficiently. Sadly, a series of high-profile clashes between business leaders and the artists they work for has undermined the integrity of this vital role, especially after details of their various acts of financial malfeasance were brought to justice. only before the courts, but also before the courts the tribunal of public opinion.
In 2017, entrepreneur Jonathan Schwartz was found guilty and sentenced to six years in prison for embezzling nearly $ 5 million from former client Alanis Morissette. This year, the Britney Spears Guardianship controversy made headlines in many of the more obscure aspects of business management practices.
These incidents and others have only intensified the light on this profession, but with more artists making more money in different ways than ever before, the attention is perhaps not only deserved, but needed. .
Howard Krant is the Managing Member of Adeptus Partners, an accounting firm whose services include business management. One of the reasons he thinks people in his profession can get into trouble is that they are increasingly allowed to invest their clients’ money when they shouldn’t.
“We consider this to be a conflict of interest,” he said. Variety.
Krant says much of this multi-level capitalization begins at the institutional level when financial planning organizations merge with corporate management firms to bring a potential client’s entire financial portfolio together under one roof. Business management companies obtain licenses to sell investments. So when their agents cultivate familiarity or trust with clients, they can leverage their money multiple times by providing a number of services simultaneously – and this practice is not only legal, but encouraged.
“It was started a long time ago by American Express, which bought out a number of public accounting firms just to extract clients from investment dollars,” he says. “There’s a lot of cross-pollination going on where it really shouldn’t be.”
Krant says business leaders not only need to understand the complex world of investing in order to advise their clients, but also know how and when to say no to their clients.
“You have to remember that professional athletes are always on the road and they don’t really pay attention to everything that is going on,” Krant says. “A lot of creative people aren’t financially savvy and look for people to take care of them. And I think the reason these incidents get reported more often is that you have a lot of high profile people that people are taking advantage of.
John McIlwee, founder of Los Angeles-based business management firm J. McIlwee & Associates, suggests that the constant evolution of technology could allow individuals to profit more, although he says it could also allow them to. get caught more easily.
“As we move into this much more comprehensive digital world, there is a lot less personal interactions with people, which obviously makes it easier for someone to be hacked and manipulated,” says McIlwee.
“People who attempt to commit fraud are now much more sophisticated and savvy rather than just the person faxing something from South Africa saying they are stuck at an airport. They mimic people’s words and they mimic people’s emails and habits. They hacked and followed something for a while in hopes of trying to attract a big fish.
McIlwee acknowledges that every time a business leader’s bad behavior comes to the media, it makes his job a little harder. But as Krant does in his practice, McIlwee hedges against these risks by being communicative and absolutely transparent with his clients every step of the way regarding every decision.
“Our protocols are incredibly strict, but I’d rather bother someone than make a mistake,” he says.
David Schachter is not a business leader, but as a wealth advisor for UBS Wealth Management USA he works frequently with them in his day-to-day operations. When asked if he thinks there has been a significant increase in acts of financial misconduct or just an increase in the reporting of such acts, Schachter said that due to social media and the power in watts of many victims, these incidents generated a higher degree of visibility, whether fully or accurately reported.
“I think in entertainment it shows up more because of the nature of people,” he says.
“But when a story unfolds, there’s a kind of perception of something negative without actually hearing the story, and then when you hear about it later, it might not be as bad as it is. believed him. “
At the same time, Schachter insists that “transparency is possibly the best it has ever been,” and asserts that the business leaders he works with are honest and act with integrity. “I don’t think it’s like a kid looking at a jar of candy,” he says. “Many of these people have been tasked with helping these people build and maintain their fortunes. But because it’s Hollywood entertainment, it tends to amplify the negatives even more. “
It also offers an important reminder that when people get rich and famous, a lot of people want to be around them and listen. The job of a business owner is to manage the financial lives of clients and help them make the right decisions.
“They are a very important level of control, so they can stay and focus on their job,” he says. “Without the business leaders, I think these clients would be really exposed.
McIlwee takes it one step further and says it’s important to try to understand each client’s personality when it comes to finance.
“What it means is [realizing] when a customer is going to panic, and how can I prevent that from happening, ”he says. “And people have different thresholds for peace and security, so the best thing I can do is make sure I’m in tune with the customer and their situation as it is. “
While none of the three have advocated for meaningful changes to the industry to avoid financial temptation – and indeed, in fact, has consistently pointed out the shortcomings of their institutions that prevent it from happening – Krant suggests. that the simplest tactic is for business leaders to remember their fiduciary duty to their clients.
“Why people don’t, it’s really amazing to me, but I think they’re caught up a bit,” he says.
“They say to me ‘OK, I’m going to invest like LeBron James bought part of the Boston Red Sox.’ I’m not saying it’s not a good deal, but it’s something a little sexy so the business owner will recommend it whether it’s good or not. So you really have to look at the condition. the minds of all these customers and how they are going to spend their money.
The challenge, says Krant, is balancing the skills of the business owner with those of the client. “They need people to take care of them because they’re good at what they do, so you have to be good at what you do. You have to care about the customer, not the money.
“That’s none of my business and you shouldn’t be making a living, and that doesn’t mean you shouldn’t be paid for your work. But pay more attention to the customer.
He adds a timeless piece of advice: “When the customer wants to invest in a restaurant, which almost all customers usually do, say no. “