Drummer Talk 270 – Agents and Managers 201

Drummer Talk

We continue on our series on representation with a focus on business managers.

Mailbag

From Scott

Hey guys hope all is well in drummer talk land. First off I got to say I love the podcast! I just recently started listening maybe two weeks ago. I’m listening in semi reverse order which is fun because to hear Troy’s excitement to bring stickers to Pasic or Namm (which ever it was), comes after hearing about him forgetting to bring them. It’s like reading a suspense novel backwards lol.

Secondly, Troy please please please please do a segment on cutting snare beds. I have a few snares that I received from a now defunct custom company, on which I never thought the snare beds were correct and have had nothing but trouble with my snare wires seating properly. I loved the bearing edge segments due to how well you clearly described the tools and the process and I think hearing from you on what to do with snare beds would be enlightening.

Thanks very much guys for reading this and taking it into consideration. Keep up the great work and thanks for providing the drumming community with such a great resource. ~Scott “skipper” Gentry

News

• 6 Tips for a Manageable Drum Set

Topic Notes

The role of a Business Manager in your career

• A business manager is like a chief financial officer of your company. The key scope of the business manager handles all financial issues such as investments, financial planning, bookkeeping and accounting, asset management and administration, tax services, insurance, and royalty examinations.

Bookkeeping and Accounting

Some of the services of business manager does paying monthly bills, collecting royalty earnings, depositing money and monitoring your bank and credit accounts for discrepancies.

Some of the bills a BM my pay from your accounts

• Rent or mortgage payments
• Vehicle payments
• Credit card bills
• Personal services such as housecleaners, personal trainers, gardeners etc.
• Insurance Bills, utilities such as water, power, sewer, and Internet

Touring Services and Financial Controls

• Transportation cost such as airfare, tour bus etc.
• Lodging such as hotels
• Salaries and Per diem for band and crew members
• Insurance for liabilities, missed shows breach of contracts etc.
• Logistics such as trucking and transport of gear, sound equipment and stage needs
• Fees and commissions for Agents, other managers, promoters, etc.
• Fees for productions costs and rehearsals

Asset administration

• Shopping for big ticket items such as Homes, cars, expensive gear etc. Your BM will let you know what you can afford or if certain items qualify for tax breaks, incentives and other tangible ways to be a wise steward of your financial resources.

Tax planning

This is broken into 3 main categories

• Indemnify the appropriate business entity: Ie inc. LLC, S corp etc.
• Planning and handling of Payroll and income taxes: IE w-2, 1099 etc. Also IRS audits etc. Meet with IRS and give over all records.
• Estate planning: Wills and living wills, Trust funds, Life insurance, Gifting strategies etc. Generally BM’s work with estate attorneys

Auditing Rights

When, How, Time frames, records requests etc. You must discuss how you can request an audit. It’s not personal everyone in Hollywood audits everyone else. It’s a way to gain an understanding of what is really going on.

Power of attorney and limited Power of attorney

• Never Grant Full Power of Attorney: with full power your BM can purchase houses and large items without your knowledge
• Limited power of Attorneys grant your BM to represent you in IRS audits and prepare checks for you to sign
• In some cases set up a petty cash system and make sure you look at it. In some cases add Lower limit credit cards. Amex is a favorite for this one.

Payments to your BM

• Retainer: Generally from 500-5000 per month. depending on the success and monitory flow of the client.
• Hourly Fees: $20-$1250 per hour depending on the service. Bookkeeping vs Forensic accounting
• Commission on gross income. Usually 5% of guarantees and overages. insist on contracts with minimums and caps of commission.

Hiring a business manager and what questions to ask

• What is the size of the firm and how long has it been in business? Small firms 1-30 people and larger firms 50 -100. Bigger is not always better Bigger firms offer more services and dedicated teams such as forensic accounting and royalty audits. Smaller firms can give you a more personalized service. Many larger firms spend more time with their more successful ( read more billable hours) clients
• Does the BM have an area of expertise such as musicians, comedians, professional speakers etc? You don’t need to have a Music BM but the firm should have someone that your BM can consult with.
• Will the BM handle your Tax returns
• Does your BM have Personal Liability Insurance and how much. Ask to view the certificate
• Has your BM or Firm ever been sued: Bigger firms can settle out of court to avoid successful judgments
• Are you registered as an investment advisor? If yes, then the advisor owes you a fiduciary duty, which is a fancy way of saying that she must put your needs first. Investment professionals who aren’t fiduciaries are held to a lesser standard, called “suitability,” which means that anything they sell you has to be appropriate for you, though not necessarily in your best interest.
• How will I pay for your services? The advisor should clearly state in writing how she will be paid for the services provided. The three basic methods of payment are: fees based on an hourly or flat rate; fees based on a percentage of your portfolio value, often called “Assets Under Management” (“AUM”); and commissions paid per transaction. How often you expect to trade, and whether you want your money pro-actively managed, will help determine which model works best for you.
• What experience do you have? Find out how long the advisor has been in practice and where. Also ask if she has any professional certifications, licenses or designations. While these are signals of credibility, they don’t guarantee a successful relationship.
• What services do you offer? The services offered can depend on a number of factors including credentials, licenses and areas of expertise. Some offer advice on a range of topics. Others may provide advice only in specific areas such as estate planning or tax matters
• Is there anything in your regulatory record that I should know about? Part of your research should include conducting background checks on the professional you may hire. You can visit the Securities & Exchange Commission and FINRA websites or the State Securities website NASAA as well as the CFP Board. While some violations are non-starters (settlement of multiple customer complaints) others may be understandable (marketing materials not pre-approved; non-client or investment violations).
• Do you have a financial interest in the entity that houses my account? This is your Madoff-prevention question. When interviewing advisors not associated with large brokerage or insurance companies, ask if they use an independent, third party custodian or clearing firm (this is the entity that produces your statements), which prevents the advisor from having direct custody of your assets and adds another level of security for your account. In the Madoff example, he was the investment advisor, broker-dealer, clearing agent and custodian for all of his client accounts.
• Can you provide three references? Ask for two current clients whose goals and finances match your own, as well as a professional reference, like an accountant or estate attorney. Who are some of the other BM’s personal clients? not just clients the firm services but clients the BM you will be working with services
• How often will we interact? What should you expect in terms of frequency of verbal, written and in-person communication? Also ask whether the BM will remain your primary contact. How approachable is your perspective BM? Will they take your calls? Do they get back to you within 24-48 hours

Common Business Manager & Financial Planner Designations:

• CPA Certified Public Accountant (CPA) is an accounting professional who has passed the Uniform CPA examination and has also met additional state certification and experience requirements.
• CFP certification: The Certified Financial Planner Board of Standards (CFP Board)requires candidates to meet what it calls “the four Es”: Education (Education (through one of several approved methods, must demonstrate the ability to create, deliver and monitor a comprehensive financial plan, covering investment, insurance, estate, retirement, education and ethics), Examination (a 10-hour exam given over a day and a half; most recent exam pass rate was 62.6 percent), Experience (three years of full-time, relevant personal financial planning experience required) and Ethics (disclosure of any criminal, civil, governmental, or self-regulatory agency proceeding or inquiry). CFPs must adhere to the fiduciary standard.
• -CPA Personal Financial Specialist (PFS): The American Institute of CPAs offers a separate financial planning designation. In addition to already being a licensed CPA, a CPA/PFS candidate must earn a minimum of 75 hours of personal financial planning education and have two years of full-time business or teaching experience (or 3,000 hours equivalent) in personal financial planning, all within the five year period preceding the date of the PFS application. They must also pass an approved Personal Financial Planner exam.
• Membership in the Membership in the National Association of Personal Financial Advisors (NAPFA): NAPFA maintains a high bar for entry: Professionals must be RIAs and must also have either the CFP or CPA-PFS designation. Additionally, NAPFA advisors are fee-only, which means that they do not accept commissions or any additional fees from outside sources for the recommendations they make. In addition to being fee-only, NAPFA advisers must provide information on their background, experience, education and credentials, and are required to submit a financial plan to a peer review. After acceptance into NAPFA, members must fulfill continuing education requirements. The stiff requirements make NAPFA members among the tiniest percentage of registered investment advisers, with only 2,400 total current members.

Music from this week’s Show

• For the Love of Money – The O’Jays
• Money for Nothing – Dire Straits

In closing…

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Next Week: Agents and Managers 301