New Generation is Poised to Take Over Hollywood’s Business Management Firms

As Hollywood Business Managers Retire, Replacements
Benedetto Cristofani for Variety

Showbiz experts ponder scenarios for the aging vanguard that handles the personal wealth of movie stars and industry execs

Hollywood stars rely on business managers to handle their personal affairs and advise them on investments so they can stay financially healthy and solvent.

But what about the business managers themselves — and their firms? Will they also continue to enjoy the same financial well-being they bring to their clients, or will they face a rocky period as a generational shift begins to take place?

Execs at most such firms agree that an unprecedented wave of partners who are the top tier of executives are nearing, at, or past retirement at many small and mid-sized firms — and there’s a scarcity of middle-age or younger execs in place to smoothly take charge.

This represents a risk for boutique firms that manage personal money and map out financial plans for entertainers, athletes, content creators and Hollywood executives.

“I have probably met with 10 firms to talk about this,” says Mickey Segal, managing partner at Nigro Karlin Segal Feldstein & Bolno, which is willing to acquire other business management firms with retiring partners.

But negotiations always seem to hit impasses over control issues because, as Segal puts it, “they were the boss, they built their businesses and so it’s hard for them to let that go.”

Segal, whose NKSFB firm is large, with 330 employees, says 40 to 50 business management firms that serve Hollywood clientele have partners mostly of retirement age and lack internal successions options.

“They were the boss, they built their businesses and so it’s hard for them to let that go.”
Mickey Segal

“There’s a huge gap in the ages of business management partners at the moment,” agrees Adam Yorkshire, partner at business manager firm Richman Yorkshire Management. “It’s a pivotal time for the industry.”

The desire of most retiring partners is to cash out — essentially getting paid for the businesses they built — but such an outcome requires clients to stay on after their long-time advisers retire.

“That’s the challenge for their firms and I don’t think they all know exactly how to accomplish the transition,” says Todd Gelfand, managing partner of Gelfand Rennert & Feldman, which has a staff of 300.

Brandy Davis, who joined Macias Gini & O’Connell in April with a mandate to grow its Hollywood practice — including through acquisitions — believes three to five years are needed for clients of smaller merged firms to fit in comfortably.

“It takes time,” Davis says. “You can’t buy a practice and expect the clients to transition in just one year. … You have to introduce the clients to other team members and gradually the older partner steps away.” MGO has 250 employees and also specializes in non-Hollywood sectors such as health care and aerospace.

Transitioning is a delicate matter because “this is a personal-relationship business,” says Ronald Nash, partner at Gelfand Rennert.

There is no concensus on what the generational transfer will eventually look like, or even if it will be orderly. Potential buyers of smaller business management firms include:

» bigger Hollywood business management firms, which would absorb the smaller ones;

» broad-based accounting firms looking to get a foothold in Hollywood and also increase their billings;

» banks and similar financial firms seeking to enlarge their assets under management;

» private equity investors seeing profit opportunities as aggregators.

Only pure financial companies — i.e., hedge funds and investment vehicles with no particular allegiance to the entertainment industry — haven’t yet been seen in the business manager sector, though, interestingly, such firms have invested in Hollywood talent agencies in recent years.

In earlier corporate activity unrelated to the current generational transition, big Hollywood business managers, commercial banks and broad-based accounting firm have bought out or into business managers, such as First Republic Bank acquiring a minority 24.5% stake in Nigro Karlin in 2013.

A possible implication from the generational transfer could be a very pronounced youth movement at business management firms. Clients — especially youngish Hollywood performers — may gravitate to business managers closer to their own age.

Michael Kaplan, the partner who heads up the private enterprise group and business management group at Miller Kaplan Arase, believes some will “look to younger managers who can be with them for the rest of their careers.”

Most agree that the business-manager sector has to do a better job of recruiting college graduates with financial smarts to build out middle-management ranks that are now thin.

“There needs to be a pathway for our industry to recruit, develop, mentor, elevate and retain young talent, but it takes work,” says Eric Wasserman, managing partner at WG&S. “There is so much competition in finance for young college grads — such as venture capital, technology, investment banking and asset management.”

Another item on the sector’s to-do list is to upgrade infrastructure from old-school paper reports to digital technology such as apps that clients can use to participate in managing their financial affairs.

Indeed, digital savvy is now a requirement for good business management as clients increasingly ask business managers to evaluate opportunities to invest in or lend their name to digital media ventures — especially at a time when Silicon Valley is courting Hollywood for both money and glamour.

Andrew Meyer, partner at Freemark Financial, says advice covers “both the upside as well as downside. Frankly, much of what we are seeing now is opportunities in app development for our clients. Once we assess an opportunity, we see how that aligns with their personal risk tolerance.”

Meanwhile, business managers wonder how their sector will cope with the impending generational transfer. “The consequence of not having exit plans at these firms could be a problem for all of us,” says NKSFB’s Segal. “It could be a messy thing. Then what happens to the clients?”

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