Malicious or incompetent advisors, neglecting to say “no,” and not grasping the true nature of the business can easily lead celebrities – entertainers and athletes – who have leveraged their talents and drive to create significant personal wealth to lose their fortunes. These same reasons have been shown to adversely affect other entrepreneurs often aligned with these celebrities such as fashion designers, artists (including digital artists), writers, and producers.
A contributing factor to the economic problems celebrities confront is financial illiteracy. In a study of 165 talent agents and managers, more than nine out of ten report that a percentage of their most successful clients has little or no understanding of how to think about and manage money. Moreover, those surveyed report that this lack of understanding regularly results in dramatically bad financial decisions. At the same time a multitude of statistics and stories show athletes and entertainers losing considerable amounts of money, if not everything.
When it comes to financial literacy, the goal is not to turn celebrities into wealth managers or anything of the sort. Instead, the aim is to empower celebrities with an understanding of their finances and the potential implications of different financial decisions. According to Rick Flynn, managing partner of FFO Business Management & Family Office and author of The High-Functioning Single-Family Office, “We have developed an in-depth financial educational program we customize for each of our clients. We use the program with many of our celebrity clients and usually other key people in their lives to educate them, so they can be better consumers of financial advice as well as be more adept at making their own financial decisions. Our clients are smart, and they readily pick up a solid understanding of their financial world giving them a greater ability to make informed choices.”
It is important to note that financial education is NOT for all celebrities. Many of them do not want to be involved in any way when it comes to their investment portfolios, for example. Still, these celebrities should probably be able to know how their investment portfolios are doing compared to benchmarks and what this means to them now and over the longer term. In general, a certain foundation of financial knowledge can prove advantageous to most entertainers and athletes recognizing that they will be relying on professionals to help them deal with their financial lives.