It’s the dilemma everybody dreams about. You’re suddenly rich, with tens of millions of dollars simmering in a bank account that, until recently, you struggled to balance with three- or four-digit sums.
City National Bank has seen this fabled scenario play out often in real life. The U.S. media and entertainment industry generated more than half a trillion dollars last year, enriching hundreds of actors, writers and producers.
“There’s always been massive wealth in Hollywood,” says Paul DeLauro, senior vice president and manager of wealth planning for the 61-year-old bank.
The film industry has a history of successful actors, directors and producers who came from humble backgrounds and amassed significant wealth in short periods of time.
DeLauro says that without the proper financial guidance, those overnight fortunes can be depressingly evanescent. But DeLauro has seen it happen: Money disappearing like the painstakingly acquired gold dust blowing away in the iconic final scene of “Treasure of the Sierra Madre.” There has always been massive wealth, and there have always been people with money problems.
“They say that most inheritances are lost within about 18 months of receipt,” DeLauro says. “From my own experience, that’s about right, no matter how many zeros are affixed to the inheritance sum.” Much the same can often be said of suddenly wealthy Hollywood talent.
“There’s a euphoria that sets in,” DeLauro says, “a notion that they have so much money that they have nothing to worry about.”
The financial adviser’s job is to introduce the idea that “money is an economic engine, not just a bunch of cash that can be dipped into willy-nilly without a plan,” DeLauro says.
CNB wealth advisers do a form of “triage” with their clients, weighing lifestyle against assets. There are limits even to a $30 million windfall, DeLauro says. It’s not just the cost of the proverbial bling-and-entourage that brings people down, but the basics of the client’s new life: Home, cars, wardrobe, health care, life insurance, the makings of a successful career.
“Often, when they look at the assets they actually need just to fund their ongoing lifestyle, they’re shocked,” DeLauro says. “That $30 million must become not principal that they can dip into, but principal they can’t touch.”
CNB advisors are there to help the financially blessed and the financially distressed, “in some cases, saving them from themselves,” DeLauro says. They help to dispel the false euphoria while reconnecting them with their money.
“Your balance sheet has changed but you still need to live within the parameters of your new, redefined lifestyle,” DeLauro says. “Hold onto that thought, and you won’t blow through your sudden wealth. It will last a very long time.”
Provided for information only. City National Bank is a member of the Federal Deposit Insurance Corporation.