Long-standing financial accountancy and business management firm, Saffery Champness helps some of the most well-known faces in sports and entertainment to manage their business affairs. Jonathan Gold, Executive Director at London & Capital sat down with them to find out more about the hazardous world of money and celebrity and how sports stars and entertainment professionals can protect themselves against the dangers.
The recent financial woes of the world’s fastest man, Usain Bolt, should serve as a cautionary tale to those in the sports and entertainment world. The man who holds world records in both the 100 and 200 metres is currently trying to unravel what happened to more than $12.7 million that went missing from his account at a Jamaican investment firm. Bolt is one the sporting world’s most decorated athletes, but a significant part of the wealth he built up has now vanished.
Pete Hackleton and Kathy Johnson both work in the Sports and Entertainment Group of Saffery Champness and know well the potential pitfalls that surround high-profile figures in these worlds. The riches that can follow the success of singers, footballers or talented e-sports players and influencers can be vulnerable if not managed properly. While situations like the one that has afflicted Bolt are rare, the path of sound financial management is littered with potential tripwires. Whether someone makes their money with an instrument, by physical exertion or through the internet, the risks remain the same.
“There are various red flags you can look for with different clients,” says Kathy, who has worked closely with wealthy celebrities for a number of years. “Footballers can ask guys in the dressing room for financial advice. Boxing has a cash culture at various levels and sometimes there can be no one looking after the interests of talent when they make it big. Bands tend to come in with one of their mates who has been tasked with managing the money. A lot of these things open people up to being ripped off and we have spent many years seeking to prevent that.”
Home and abroad
A common thread that connects a lot of wealthy sports and entertainment stars is that they are internationally mobile and face complicated multi-jurisdictional tax demands. A tennis player or a racing driver may spend a large part of the year touring and making money in different parts of the world. Similarly, bands and e-sports stars will have commitments in various jurisdictions and are not always aware of the financial implications that come with that. Some emerging markets have in the past been less strict on tax for visiting sports and entertainment stars, but according to Pete and Kathy, most have now realised the potential for increased revenue and that has meant additional costs for their clients. At Saffery Champness, a global network of affiliate advisors ensures they are in a good position to help clients meet their worldwide tax obligations.
“Some people don’t understand that they will be subject to different tax regimes as they move around the world,” says Pete. “We sit down with them and look at the territories that they are going to and see what we can do. For some, it can start to drive part of their schedule. If a tennis player is going to have to pay a lot of tax for turning up to one tournament, it is an important consideration for them. This kind of forward planning is the key to successful financial management.”
Taking care of business
The Saffery Champness Entertainment Group deals with a variety of clients and some stand out from the crowd because of their level of sophistication when it comes to managing their finances. Pete and Kathy believe there is a lot to learn from the approach taken by established music acts from the United States. The professionalism that often characterises these musicians can provide a useful example to any up-and-coming stars on how to manage their financial affairs. The establishment of a strong in-house team for the artist often means that there is less direct contact with the client in question, but those working on their behalf have a level of expertise that benefits them.
The other end of the spectrum can involve advising younger people who have often built their wealth from more modern, but increasingly common, occupations that usually revolve around the internet. This can be anything from competing in e-sports to building a reputation as an influencer on YouTube. This brave new world of online riches can bring large amounts of revenue to the lucky few. It is a common belief in these circles that this kind of income is exempt from tax, but it is income like any other and if not dealt with properly, can lead to problems for the recipient.
“Those with viral income streams may have just been sitting in their bedroom accumulating a lot of money and now we have to establish a financial plan, and seek to reduce their tax burden,” adds Kathy. “They tend to come in with a lot of new jargon that we have to try to understand. Sometimes the parents are keen for us to talk to them as plainly as possible about the implications of their financial situation and the need to pay tax. As with any other profession, all of their income is taxable after all.”
An experienced wealth manager can act as a strong compliment to the work of a financial adviser. London & Capital has a depth of experience advising clients on the intricacies of cross-border wealth management. Important considerations such as investment strategies, trusts, cashflow modelling and property portfolios should all be discussed with a knowledgeable adviser.
“At London & Capital, we take pride in our unique ability within the market to advise clients who are internationally mobile,” says Jonathan Gold, an Executive Director in London & Capital’s US Family Office. “Sports and entertainment stars who travel the globe have specific needs when it comes to managing their wealth. It is often generated in multiple jurisdictions, without a centralised platform to coordinate the investments or reporting. Having an adviser that thinks and acts globally is very important. Our particular experience with assisting truly global citizens, including International Americans is something that our company places a lot of value on.”
Professional financial advice and considered wealth management along with careful tax planning are essential tools for those with complex business affairs in the world of sports and entertainment. Ensuring that your affairs are in order early on can save you a lot of trouble later. Solid financial foundations can take a long time to build up but only a short time to collapse. Maybe even less than 9.58 seconds.