Whitney Houston may have been broke before she died, and now her estate may have problems.
NBA star Allen Iverson may be broke, too.
And as this story in today’s Huffington Post relates, he has lots of familiar company in Mike Tyson, Lenny Dykstra, Dorothy Hamill, Terrell Owens and many, many others.
In 2009, Sports Illustrated ran a story called How (and Why) Athletes Go Broke, which tells the tales of woe of several athletes, and details some of the common causes of high profile bankruptcies.
My personal favorite is the story of MC Hammer’s bankruptcy. One of many causes was the construction of a $30 million mansion. I remember reading at the time that Mrs. Hammer had the architect tear down and rebuild their marble and gold-fixtured master bath, not once, but twice, because it simply wasn’t fabulous enough. The architect knew something was wrong when she got an unexpected call from Mrs. Hammer asking how much money they could save by cutting back to ceramic tile and stainless steel fixtures…
What’s the lesson here for financial advisors?
No matter how much your clients make–
and you can add as many zeroes as you like–
they can always spend more.
I learned that lesson first hand as a young private banker. Wealthy clients never have a shortage of hangers-on and would-be beneficiaries, and they multiply exponentially if your client is famous.
I remember several years ago, sitting at the kitchen table with a 17 year old high school student and her mom because the student’s boyfriend, my 23 year old major league baseball player client, wanted to buy a new house. It’s probably more accurate to say that the girl’s mother wanted him to buy a new house. “Joint tenants with rights of survivorship” she instructed me to title the property.
I was disgusted with the entitled way the girl’s mother treated the player. They had ordered pizza before I arrived, and when the doorbell rang she slapped the player on the chest with the back of her hand and held out her open palm. He dutifully reached into his wallet and gave her money to pay for everyone’s pizza.
I was not surprised when the player called me the next day and said “put the house in my name as sole owner”.
I was also not surprised that he left the girl and her mother behind when he was traded to a new team later in the season.
Famous or not, your clients are likely to have a lot of open palms held in front of their faces. While they may need a good financial plan, a comprehensive estate plan and appropriate asset allocation to help make sure money lasts, the one thing they may need most is a rational voice in their ear.
That should be you.
No matter how much they make, they can always spend more…