Clients who have waited a long time to become what hey consider to be rich, either through a settle- ment, real estate sale, inheritance or — prevalent in
Southern California — a hit movie or screenplay, often want
to make up for lost time and go on a big-ticket buying spree.
Buttressed by the idea that the good times will never end,
some tend to put real estate often at the top of their shopping
list. Other targets of the newly wealthy often include boats,
jewelry, horses and new “investments,” usually in industries
where they have little or no experience or expertise, such as
restaurants, complicated real estate deals or something completely different like vitamin supplements or a fleet of food
trucks. When dollar signs continue to flash in their eyes, how
does an advisor rein in the extravagant client?
A good way is to be direct and honest and to be prepared to
provide data and specific examples. “If the pilot’s not renewed
or the next screenplay flops, the money train can quite sud-
denly hit a wall,” says Los Angeles-based advisor Jeff Fishman
of JSF Financial, which serves “new and old money” clients,
many in the entertainment and real estate industries. “We
need to position so-called suddenly wealthy clients so their
money can last beyond the usual temptations. No one likes to
lower the boom but we’re prepared to have that talk.”
Not all of those who like to make so-called extravagant
purchases are reacting to some sort of sudden wealth effect.
Many diligent, otherwise stable clients may decide it’s their
time to enjoy life. But do they need an entourage when a nanny
will do? Do they really have room for several European sports
cars in their driveway or a thousand-bottle, temperature-con-
trolled wine cellar in the basement? Should they buy a minor
league sports team? A racehorse? Or a personal submarine to
keep them amused for the summer?
By Joseph Finora
REIN IN THE
CLIENT Advisors have to be the reality check when a client comes into a windfall, but what’s the best
method to be heard?
Illustration by Marco Melgrati