Investing multimillion-dollar accounts for a client that you meet for 15 minutes — if ever — would seem improbable to most advisors, but is not a rare occurrence for Lee Rawiszer.
The principal of Westport, Connecticut-based Paradigm Financial Partners, a 30-year veteran advisor, has developed a niche over the past five to six years catering to entertainment, television, sports and music industry clients, including “some very big household names,” he tells ThinkAdvisor in a phone interview.
Rawiszer’s unique clientele developed with a single engagement that pleased the client’s career manager, causing a “ripple effect” of referrals from a network of about a dozen business managers who pay the bills of mainly L.A.-, New York- and Atlanta-based athletes and entertainers.
It is the entertainers’ complete trust in their business managers — the key relationship managers and referral source — that make it possible, indeed likely, that Rawiszer’s client meetings peter out after just minutes.
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“The business mangers tell me to keep it simple, to describe [the investment plan] in layman’s terms,” Rawiszer says. “Some of them don’t have the patience; they sit in the room for 15 to 20 minutes and say ‘I trust you guys; whatever you decide I’m fine with it.’”
But those are the relatively engaged cohort who will even show up to a meeting; about half never even set foot in the door, says Rawiszer, who notes that as much as he recommends in-person meetings, the subject matter may go over the head of a 20-year-old kid from a background lacking financial sophistication.
And therein lies the unique challenge of many celebrity clients, who, at a young age, and often after growing up in poverty, may quite suddenly command an annual income of over $5 million — the average NBA salary, for example.
“When they’re riding high, they never envision that this can end,” Rawiszer says. “Their picture of financial reality gets distorted at that moment because they reach an apex of fame.”
The rather shocking reality they don’t grasp is that “over 70% NBA ballplayers file for bankruptcy 2-3 years after retirement,” Rawiszer says, citing bad marriages, divorces, back taxes and “schemers who put them into bad investments.”
The NFP Advisor Services-affiliated independent, with over $900 million in assets under management, says even the cautionary tales often fail to reach the minds of the young superstars who parlay their sudden wealth into “wild spending sprees.”
Their business managers — whom Rawiszer describes as genuinely caring — ask them: “Do you really need that Lamborghini? You already have 15 cars; do you really need another one?”
It is precisely because these managers are so intimately familiar with the crash and burn scenarios of their celebrity clients that they hew to the appeal of Rawiszer’s investment pitch, which centers on what he terms “irreplaceable capital.”
The idea is simply to acknowledge the on-average quite short careers of these celebrity clients and create a plan that will provide income that can maintain a high living standard for their lifetimes and for their heirs after their period of “extreme earning” is over.
“We prepare our clients for life after sports,” he says.
Rawiszer cites the anomalous example of Paul McCartney, who sold out Yankee Stadium when he was in his late 60s, compared to a one-hit wonder like Vanilla Ice; or Derek Jeter, who played shortstop for the New York Yankees for 20 years, nearly four times the longevity of the average player in that position.
Because the athlete or entertainer will typically significantly outearn in his three- to five-year stint what an ordinary professional will earn in his 35-year career, there is a basis on which to fuel a sound long-term investment portfolio, as long as the star doesn’t blow his opportunity.
“Looking at their assets — you have this finite window,” says Rawiszer, who says his focus is on capital preservation.
“Yes, you have to grow it — I don’t want it sitting in cash — but you really want to create a financial cocoon. You will have financial security for the rest of your life if it’s done right,” he says.