Game Changers: What Athletes and Entertainers Can Learn From a Family-Office Approach to Wealth Management

Sudden wealth can bring unexpected challenges, especially for sports and entertainment stars, who must grapple with them at a young age and in the public eye. To avoid the pitfalls, an approach to financial management that’s informed by family-office expertise is helpful, says AlTi’s Stephen O’Kane.

We know from the headlines – and from the histories of some of the clients we support – that success on the field or stage does not automatically translate into long-term financial stability. But we also know from the most positive cases that, with careful management, the wealth generated by a fruitful career can be sustained, augmented, and extended for the benefit of future generations. 

Success combined with financial stability provides more than the ability to take care of one’s needs. It can provide a platform to give back to one’s community and society at large, and so create a dual legacy – both private and public.

We believe that the difference between success and failure often comes down to who the individual chooses to work with. Moreover, if stars – in whatever field – apply a family-office approach to financial management, it will provide them with a “playbook” of how to successfully navigate the challenges they will inevitably face.

Entertainment artists and sportspeople are taking control of their earning power in ways that would have been unthinkable just a decade ago, often empowered by social media¹.

Increasingly able to monetize their name, image, and brand, professional athletes feature prominently in the global rich lists, with the world’s 50 highest-paid earning an estimated combined gross income of $3.88 billion in 2023/4². 

Meanwhile, the internet has created a new swathe of high-profile influencers, including the likes of Jimmy Donaldson (MrBeast), whose estimated 2023 earnings ($82 million)³ comfortably exceeded those of Hollywood superstar Tom Cruise ($45 million)⁴.

But top performers in their field know that they don’t acquire their fortunes single-handedly. Making it to the pinnacle of their career requires a team of supporters: not just coaches or directors, but also mentors, managers, and legal advisors, particularly in disciplines where future revenue streams depend heavily on well-negotiated contracts.

For many, money itself may not be the goal, but what they, or their children, or their future companies and foundations, can do with it is always going to be a prime consideration. To leave such a legacy, the wealth has to last long enough. In many cases, it does not.

So why do some of the most talented people (supported by the most talented teams) end up in financial difficulties?

The answer is that wealth is a game of two halves – making money and managing money – and they require different skill sets. For successful individuals, the team they need to acquire the money and the team they need to manage it and use it appropriately are different. But they both need to be world class.

How are fortunes misused? For artists and athletes, some common challenges include:

o  Supporting “the village”: Many successful athletes and artists feel, quite rightly, that their success is owed in part to their community, and they want to share their good fortune. How much, when, and with whom is not an easy question to answer, and it can lead not only to financial difficulties but also strained relationships if managed in a haphazard way.

o  Failing to plan ahead: The natural tendency is to assume that the status quo will continue indefinitely, but success is notoriously erratic. This means that careful planning for the next stage – once a career starts to wane or ends abruptly – is needed to mitigate or avoid non-linear earnings or a sudden drop-off decades before the conventional retirement age.

o  Tax complexities: Unlike a standard career, where taxation is usually fairly straightforward, the career of an artist or athlete very often spans multiple tax jurisdictions and revenue streams. The potential for excessive tax payments or – worst-case scenario – unwitting tax violations is much higher. 

Solving the above challenges without the right support team is not impossible but is highly unlikely. Why? For many, if not most, success comes at a relatively young age and suddenly. These are not the ideal circumstances to face highly complex financial decisions without experience or expert advice – especially if the individuals involved are uncertain about who to trust or where to turn.

A common scenario we see is that people in this situation are naturally drawn to real estate because it feels familiar, tangible, and a “safe bet”. There is nothing wrong with this, and real estate is a valid and important part of many portfolios. However, we’ve seen many cases of high-profile clients who have, for example, invested heavily in buy-to-let arrangements without considering wider opportunities to diversify their portfolios.

An experienced, reputable adviser could warn them that many real-estate deals have low liquidity, can come with large amounts of debt, and often entail high fees, which can lead to problems further down the line. More to the point, they could also identify real-estate opportunities (eg indirect exposure via real-estate-focused funds) that genuinely serve their risk-and-return objectives – or offer alternative ways to diversify and grow their portfolios, such as funds, co-investment opportunities, or club deals, that they might not otherwise have access to.

The wealth of ultra-high-net-worth people in the public eye often makes them a target for a range of unscrupulous individuals and firms keen to push bad deals their way, often involving tempting propositions such as “guaranteed returns” (which should always be a red flag). 

Finding the Right Solutions

No two stories are the same, particularly when dealing with highly skilled, creative individuals who are, almost by definition, trailblazers. But while diverse in background, we find that successful artists and athletes have three needs in common:

• Clarity: Financial management is a full-time job, and they already have one (or more). A support team focused on this dimension can free them up to focus on what they do best and provide them with a clear plan for managing their wealth.
• Confidence: As noted, everyone wants to work with the rich and famous, but many have bad or selfish reasons for doing so. Finding people you can genuinely trust is therefore harder.
• Control: Everyone wants to be free to decide how to spend their time and money. But in spite of (and often because of) their success, many performers are weighed down with obligations on their time and wealth. That’s why trusted partners can help ensure they’re always on top of the situation.

Crucially, all of the above takes time, which is the one thing that money can’t buy.

To be free to pursue their ultimate goal and make the most of the time they have, an artist or athlete must reach a financial “inflection point”, after which they can begin to make decisions based on what is right rather than what is expedient. In other words, creative and personal control.

Besides ensuring their wealth is well managed, there is no other way to reach this point.

Therefore, an individual with highly complex financial needs and a long-term vision to pursue requires more than a product. They need a full-time, dedicated financial team. This kind of family-office structure is used by many wealthy families to administer and preserve hard-won wealth over multiple generations.

The Way Forward

Building a world-class, future-ready financial support team is not a simple task. It requires exclusive knowledge and top-tier talent, both of which are hard to come by.

That said, it is possible to benefit from the experience of those who are pursuing similar goals. We know this because of the network of 700 family offices we work with around the world, and we have acquired a “playbook” of best practices gathered from these interactions.

In addition to these generally applicable principles, joining a global network of this kind completes the picture. By connecting with and sharing ideas with others in similar situations or with similar aims, you can gain access to knowledge, contacts, and investment opportunities that others simply cannot.