How Business Managers Handle Money for Stars Who Make Less Than They Think

A cable paycheck is all the rage, but taxes, commissions and fees can reduce that to $200K per year, says Scott Feinstein, who manages Taylor Lautner, Mila Kunis and Aaron Paul -- so a client might dream of Lamborghini but wake up to BMW instead.

It's easy to overestimate the wealth of a celebrity.

"Take someone who stars on a popular cable TV show," says Scott Feinstein, a business manager who represents Taylor Lautner, Mila Kunis and Aaron Paul, among others. "Most people assume they're making good money, but each cycle has nine to 12 episodes. Let's say they make $50,000 per episode. Factor in taxes, union dues and commissions, and it might come out to only about $200,000 per year."
So what happens when one of these stars wants to buy a multimillion-dollar house, an extravagant car or a piece of jewelry that's astronomically priced?

That's when the business manager steps in.

Of all the members on a celebrity's robust advisory team, the one who arguably calls the most upon the art of persuasion is the low-key position of business manager. With financial savvy, they advise clients on how to spend and save their money, including investments and real estate holdings. They also quarterback the retirement fund for the inevitable day when a star's popularity has faded -- requiring them to say "no" to a client who, if ascendant or A-list, most likely has been utterly seduced by Hollywood's ever-present, evanescent "yes."

"A client comes to me and says he wants a Lamborghini," says Alan Reback, a top business manager. "I say: 'Where are you going to drive that Lamborghini? Twenty-five miles per hour on Wilshire? What you love is style. Look at this top-of-the-line BMW. It's cheaper.' "

Sometimes common sense doesn't cut it. A business manager can point out that it makes more financial sense to charter a private jet than to buy one, but for many stars, that's not the point. Money buys status, and celebrities want to trade on their cultural cachet while they have it. That $35,000 watch is an investment, a client might argue. At this point, a business manager might break out the next weapon in the arsenal: explaining real costs. For example, Feinstein might divert attention away from the retailer's price tag and toward the desired object's equivalent value in earnings. That watch, he'll say, actually costs $100,000. That's how much money must be earned to support a $35,000 purchase once the necessary subtractions occur. Buying that watch now could mean forgoing your freedom to choose TV and film projects later, Feinstein might hint.

Such logic can fail. "The client told me to go f--- myself," says Feinstein. "Another time, a client yelled, 'You are not my father.' "

Contending with difficult clients is one thing, but clients who don't know what they want is another. Business manager Shane Glass, who represents such artists as Motley Crue and Julie Andrews, remembers a client who came to him when Tesla Motors introduced its stylish electric cars. The client just had to have one. The problem? There was a three-year waiting list. But as many top Hollywood business managers often do, Glass pulled strings and got Tesla's head of sales on the phone, who then arranged to have the car transported to his client's house for a personal test-drive. "It's too small," his client responded upon seeing the Tesla. "I don't want it." Says Glass, "I had to call Tesla back and come up with some excuse and stress how appreciative I was."

Perhaps even more challenging are the client's friends and family members who deploy their own persuasive art of guilt and filial ties to get what they want. Glass says that one of his client's "kids" -- who was in her early 30s -- once demanded an increase in allowance. The business manager was tasked with being the "bad guy" who said no. "The 'child' threatened to earn money in illegal ways if we didn't raise [her] salary," says Glass, who stood firm. (Click here for more on mixing family dynamics with finances.)

Despite typically being paid 5 percent of their clients' earnings in commissions, it's not unprecedented for a business manager to fire a client when financial conscience dictates. Reback tells the story of a former client who was starring on a hit TV show and wanted to buy a beautiful house across from the Hollywood Bowl. The home was judged to be way too expensive, but it didn't matter. The client wanted it. Reback was charged with finding a good mortgage rate. He did, only to be confronted with the client's boyfriend, who touted a mortgage with an even better rate -- but it also had some catches and assumed risks that Reback determined to be financially unwise. Forced to choose, the client sided with her boyfriend. Reback decided to stop representing her.

"She turned into one of the bigger TV stars around," says Reback. "I probably lost a boatload of money, but if I had to do it again, I would." Referring to a Hollywood star who came close to financial ruin after an outrageous spending spree that included buying nine Rolls-Royces, a pyramid-shaped super-tomb and a medieval castle, he adds, "I don't want the perception of being Nic Cage's business manager."