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How to manage Hollywood actors money properly!.

So here comes a very intersting article on how to manage Hollywood actors money ,and other peoples money who are expected to have a short career properly!.

Alan a long time consultant of us, from Los Angeles have managed the money and investments for hundreds of clients in the business we call Hollywood or showbiz.

Alan ran for over 30 years a full service accounting and money management firm in Hollywood and he used some really smart strategies to help his clients out along the way towards their financial independence.

So Alan new from experience that most Hollywood careers will last around 5 years, and that means that you will make the bulk of your money with that one hit or a few hits that you usually get in a normal acting career.

So Alan new that a lot of young actors and musicians are goanna be hot for that 5 year period and then usually it gets trickier since Hollywood is based on new talent coming in all the time

And very few people make it to the A-list or even the B-list categories over time.

What we mean by A and B list careers is that you act every year on a regular basis and you have real income coming in on a yearly basis from acting.

So what a typical Hollywood career looks like is that at 22 years old you get cast in that tv-show that becomes a real hit and you act 5-6 years in that show.

But then usually the second project after the hit show ends is more difficulty to pinpoint.

And maybe you can act for another 5 years after the show has ended, but if you have been type casted for one roll type it will be much more difficult to re-invent yourself in Hollywood.


So Alan had a few ground rules that the clients needed to accept upfront and those where that he did not take on any clients who had not signed at least a 500.000 dollar a year contract before taxes.

So he wanted to have clients that had something he could work with.

The second thing he demanded was a 3 year Power of attorney to handle the finances for the client, and many potential clients did not like that term and that was a deal breaker for many clients, but the once that stayed where all satisfied in the end.

Alan had checks and balances in order in the sense, that he had an outside CPA checking the accounts once month so there was no misuse of funds from Alans companies side, and the client got that report once a year.

Which is something that we also highly recommend that there is checks and balances, that if you give an adviser full access or a power of attorney, find a CPA who will cover your back by looking at your financial statements and investments from your financial adviser, so you have your back covered.

Because it happens all the time that financial advisers take advantages of clients funds, and there are even some real scammers out there.

Most of the financial adviser are serious about their profession, but you need to do your due diligence properly before you choose a financial adviser.

Alan was often brought in by various agents who represented younger clients who had signed nice looking contracts.

Financial adviser.

Alan charged 5% of the income of the actor or client, and on top of that he took 10% of the investment returns.

And this is how he handled his clients money and how the explained the situation to the young red hot clients, who wanted the world today here and now!.

Alan sat down with the clients in front of a big tv and he played clips from different tv-shows and movies, and said look at this actor or this actress.

And here is where they are today financially, and he used the examples of people who made millions and lost it all!.

This can be you in 10 years, do you want that or do you want me to help you secure your financial future going forward?.

And this kind of visual schooling did really take and the client understood that this is a real thing in Hollywood when the lights go out on your careers ends, and you have nothing to show for more than just memories.

So the way Alan invested was that he first set a monthly budget for the client to live on , which was usually around 8.000 dollars a month.

So the rent for an apartment was set at 30% of the net spent income so 2400 dollars + utilities.

Then he set 900 dollars for a car, a good nice new car who the client could use for 10 years going forward, usually he opted for an Audi A6 or Range rover, a car that would take take the client to where he or she needed to go, but also had many good qualities as looks and safety features.

Then insurances and health care plans was important to make sure that the client was well protected in all aspects.

Usually the client had then 3500-4000 dollars left that was goanna cover Everything Else that month.

And what Alan did was that he made sure that the client had 500 dollars in tip money cash, everything else had to be put on a credit card with cashback rebate, he did not like the point rewards since they get inflated by purpose by the companies offering the points.

This Way Alan could see the monthly spending of the client, and if we saw red flags he could act on in for each individual month, and then sort out with the client why certain areas took up so much of the monthly budget.

So how did Alan and his colleges invest the clients money?.

So we as an example we use here a client that was making 300.000 dollars after taxes and agent, financial adviser costs.

What was always looked at was from which town or city was the client originally from?, and Alan always suggested that it was a good time to leave Hollywood and Los Angeles when your career was no longer booming.

Home town.

So if the client was from a nice smaller town where houses where trading at 5-15% of the Los Angeles prices then Alan took a mortgage on a house in their hometown, of course with consulting the client, and making sure that there was a good family/relatives still living in that area

And the goal was to pay of this house inside 5 years time, so the client had a financial asset in his or her name.

The second investment that was made was to build up a stock portfolio with 30-40 companies and use the 60+20+20% method for the clients.

If you do not know what the 60+20+20% method is, it is a investment method used to buy 60% blue chip stocks in 30 different companies so 2% per company, then 20% is for bigger tech companies like Facebook, Google, Amazon and similar companies.

The last 20% was to try and find those high risk ,high reward stocks in new start ups for both tech and biotech each year, and hope to find that one rocket every other year.

So usually 100.000 dollars was invested each year this way into the stock portfolio.


Then the reaming money which was anywhere from 50.000-75.000 Alan suggested that 20% of that was given to animal shelters and the rest was used to invest in the clients own LLC/business.

So the idea was to figure out what the client was interested in and then open up an LLC and then help the client source products or whatever to slowly build up a solid business.

A few really good examples are Jessica Alba and Jessica Simpson who both made a lot of money starting up their own business along side their acting and music careers.

The business goal was that inside 5 years time the company should have at least 1 million dollars in annual revenue and earn 25% in net profit.

So this would give the client a way to have a life outside of the Hollywood show business.

And this idea of a small own LLC is in our minds a genius idea to build up a money generating side hustle, that other people can manage for the actor/actress, but is there when the Hollywood career comes to an end.

But where the client can use social media for marketing the business, when they are still active and hot in the business.

This was not possible 15 years ago, with the lack of social media back then, but in todays world it is very easy for the client to actively market their own business.

So this is how you invest money for a client that you know will have a short career according to all available statistics over the past 60 years time.

The same goes for athletes, that also have an average of a 5 years professional career according to all available statistics.

So when you have a client that you believe will have a short career, you do not want them to handle their own finances, but you want a professional person to handle these investments but also take care of all taxes and other serious matters so they dont end up owing back taxes.

What people also forget is that, this way the client can say to friends and family and hang rounds that my financial manger is in control of my finances, so i can not lend you 100.000 for that fantastic business adventure that most people come out of the woods to present to you once you make a little bit more money than the average person does.

So you take way that decision making and it helps the client out with not having to say NO to friends and family and getting shamed for not being able to give everybody a big chunk of change.

Take care.


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