P&C Podcast: Navigating Financial Success for Athletes and Artists with Bruce Seckendorf

Intro (00:06):
You're listening to the Alliant Insurance Podcast dedicated to insurance and risk management solutions and trends shaping the market. Today our team of industry specialists offers insights and explores a wide range of topics with the help of expert guests from various fields. Each 10 to 15-minute episode provides business owners and risk managers with the most important information they need to know about their insurance programs. To never miss an episode, be sure to hit that subscribe button. In today's episode, Joe welcomes Bruce Seckendorf, a highly respected business manager who has spent decades working with some of the biggest names in the industry. Joe and Bruce discuss the various challenges faced by today's professional athletes and artists when it comes to managing their finances. Bruce provides insights and advice on how to become more financially viable and maximize earnings. Now here is your host, Joe Charles.

Joe Charles (01:05):
Welcome back to another Alliant Podcast. I'm Joe Charles, senior vice president of the Sports and Entertainment division at Alliant. With me today is my good friend, Bruce Seckendorf, who is a founding member and partner at Seckendorf Hasson Reilly & Kobay. Bruce, we've known each other for close to 20 years. Thank you so much for being a part of the Alliant Podcast. It really means a lot to me. So, I'm going to start with, tell me a little bit about yourself and how you got to this place in your life.

Bruce Seckendorf (01:42):
Well, I went out on my own and started my own accounting firm in my mid-twenties, which was pretty risky at the time. I left a big firm in the city and just started my own practice. After grinding for a bunch of years, I was introduced to a couple of different people in the music industry. One of my closest friends is Theo Sedlmayr, a very big entertainment attorney these days. He was very influential in getting me started in the music business as a business manager. I met a few other people. None of them knew each other; they were all independent of each other. I saw a great opportunity to set up LL Business Management. I named it after my two daughters, Lindsey and Lauren, and here we are all these years later and we're a pretty good-sized company. But that's how I got my start.

Joe Charles (02:28):
That's pretty awesome. How big is the firm now?

Bruce Seckendorf (02:32):
We have an LA office with about 8 to 10 people out there. We have a Long Island office right outside the city limits. That's a tax strategy that we can get into in a little bit. We've got about 35 to 40 people out here and we have an office in Midtown that has 3 or 4 people in it. So, I guess, all in the company's probably about 50 people.

Joe Charles (02:53):
Do you guys have an international presence as well?

Bruce Seckendorf (02:57):
Yeah, we do a lot of work out of the UK with a bunch of different companies, more in the sense of a joint venture than an actual office. International laws make it difficult to have an office over there, but we do a lot of work with clients outside the United States that come to tour in the United States. We’ve become specialists in that area doing CWA work - central withholding agreements - and the non-resident returns, etc., just dealing with those issues.

Joe Charles (03:22):
So, you work with a lot of artists when they're in the states, like the international artists?

Bruce Seckendorf (03:27):
Correct. We'll handle all their U.S. tax filings and work hand in hand with different accounting firms in the UK, primarily three or four at the current time. And we just make sure that the structure's correct so that they can utilize foreign taxes on their side of the ocean. Doing it on the U.S. side is easy for us; that's what we do every day. And then we also help them, again CWA work; to a layman, it's really nothing more than a budget. It's artist A, B, C is going on tour in the United States. What's the gross revenue? What are the payouts? What are the expenses? Because the government over here is going to withhold 30% off of the gross. So, what we try to do is minimize that for cashflow purposes. And so, they're not sitting there trying to get some massive refund at the end of a tour. And you also have to wait until we can file your U.S. return, right? So, if you're touring in April, we're not going to file that return and you're not going to get your refund until April or May of the following year. So that's why we're going to do that CWA work and work in conjunction with them.

Joe Charles (04:29):
Wow, that's interesting. What type of challenges are out there for today's artists from a tax perspective, if any?

Bruce Seckendorf (04:38):
I think it starts with corporate structure. A lot of times when I pick up a new account, the business management firm or the CPA firm has set up an LLC. I'm not a fan of the single member LLC. We're not about trying to evade paying tax or avoid paying taxes, but I don't like to splash my client's profit and loss right there on their personal return. So, I like a separation of entities. So, a lot of times I'll recommend to a domestic client, somebody in the U.S., the S corporation is my favorite entity to form. The other thing at the beginning, when you file that initial return, a lot of business managers, CPAs, they elect cash basis. It's a simple method of accounting. I'm a fan of the accrual method of accounting. It's a better match of income and expenses to when the money is actually earned. So, you're not getting clobbered by getting unnecessarily a big advance or a big check at the end of the year. So, I think day one, working with a new artist, it's structure. You need a separate tour company, separate loan out company. What method of accounting are we going to choose for those entities? That's day one, step one.

Joe Charles (05:47):
Right. So, what are the steps? You meet the client, you lay out a structure, these are the things that we need to do for you to be successful. Do many of your clients follow the blueprint?

Bruce Seckendorf (05:59):
They say they will, I can't lie to you, a lot of them don't. I would say the step is meet the client, land the client, set up the structure, work with the attorneys, their entertainment attorneys, get those entities formed. My plan is really simple. It's a plan that I live by myself, and I love for my clients to listen to me, which is basically, the end game is not that hard. You're in a unique position, you're blessed with a lot of talent, you can make a whole lot of money. The end game is, pick a number: If you can accumulate 5 million after tax, get a safe 5% return, which is not that crazy for the rest of your life, you're getting $250,000 a year without touching the 5 million. It's basically a little more than $20,000 a month. If you want more, let's accumulate. Let's set our target at 10 million.

Now you're up to over $40,000 a month. You're almost at $10,000 a week for the rest of your life without working. Right? That's at 10 million, and so the formula goes. So, getting to that point requires some discipline and to just not spend every dime you have on a private jet. It's okay to have one Rolex or one high-end watch, you don't need six or seven. At the end of the day, it's the client's money, they steer the ship, we can only advise. Many of our clients do follow the blueprint to your initial question. Those that don't, we just keep trying, hopefully they have long careers, but most people aren't blessed with a long career. Most people, it's just a few years and you're out.

Joe Charles (07:32):
So many of your clients, are they fortunate enough to get a second album? I know all the different ways that a client can make money doing touring, releasing albums, if they're fortunate enough to get a 360 deal. Is that model still out? The 360 model?

Bruce Seckendorf (07:48):
Yeah, it's still out. I think the streaming is big for the artists, the revenue stream. Touring, obviously, I think you alluded to that. Yeah, most of our clients have had multiple albums dropped, they've got good revenues. It's just really controlling the spending. I'm a big believer in, money comes in, obviously you pay your expenses. I'm talking about after expenses, whatever's left in that pot. If it's a million dollars, bank $500,000, go ahead and spend $500,000. If you can do that, you can accumulate. When I meet with some of the professional athletes that I'll deal with and have the same conversation, obviously it's better if you can bank more than half your paycheck at those enormous numbers. But at a minimum, if you bank half, you're going to be in good shape. Taxes paid, bank half, spend the other half, it's fine. You'll be okay.

Joe Charles (08:38):
Good intel. What I've seen also, you and I have worked together a long time with music clients. There's tour insurance, there's general liability, there's umbrella coverage that we need to put in place. There are the foreign tours, cancellations, disability, non-appearance. Some of that stuff could be very costly. There are copyright infringement situations that can arise where an artist writes a song and then someone comes out of the woodwork and says the song was their original material. And then you have to defend that. Have you had many situations where that's happened with any of your clients?

Bruce Seckendorf (09:20):
Yeah. Where they've had to defend their music? Yes. A number of times. That becomes more of a legal issue than where my job comes into play. But something that is interesting based on what you're saying, just a thought that came to my mind, it would be nice if the insurance industry came up with a plan where you've got a lot of startup artists that are going on tour and just not getting that much per night. And I think you know this firsthand, Joe, like the premium per show, they can't really afford the insurance because they're not making any money. So, it'd be nice if there was a pool in the insurance industry for new artists coming up where it was almost like auto insurance. Like where we could get them in this pool for minimal insurance with minimal risk. I know it's a different animal, but that would be a good way to go because not everybody's getting six figures a night. Some people are just getting, $5,000 or $8,000 a night and by the time you're done with your expenses, you're barely making any money. And the last thing you need is an insurance bill per show of another $500 or $1,000. Yet they need it as you know.

Joe Charles (10:22):
And you know what Bruce, you are onto something. That's a good point. I've had those discussions with some of our carrier relationships. A new artist typically is not making that much money. It's more promotional than anything. And that the money that they're making is all going towards the cost of their insurance, paying their staff, paying their folks that are on tour with them and then end up being the loss leader. I guess the benefit for them is they get a chance to showcase themselves and get a chance to work on their craft, but at the end of the day, they're not really making a whole lot of money.

Bruce Seckendorf (10:57):
Correct, but they need the insurance. Another area that we're focusing on, and we really try to do this with all our clients, it's beyond estate planning. Most of our clients are younger, but it's really more about making sure that they have a will in place. Especially in the world we live in right now, sitting down with an estate attorney, drawing up your will, determining while you're still with us, where do you want your assets to go? Sometimes those numbers get to be very large. You've seen a lot of song catalogs that are being sold these days at every turn, so many people have these multi-million-dollar assets that they haven't converted to cash yet, but the estate might, or the estate might want to keep it. But estate taxes and preserving your assets is important.

And if you're single or you're married or you have kids, these are all things that need to be considered. And you've got a lot of younger people making a whole lot of money and many of them are running around without any will or plan in place. Unfortunately, we've crossed that bridge a couple times where the client has passed on and we're left holding the bag and dealing with a bunch of family members fighting. Some of the larger estates you've seen over the years, not firsthand, but I'm sure there were some problems with the Michael Jackson estate, the Prince Estate. Those were large yet I don't know the nuances of the wills and how it was laid out, but rumor has it, they weren't totally organized like they should have been.

Joe Charles (12:21):
Yeah, you would think who those artists were, I mean they were huge, huge names in the industry, that they would have everything buttoned up. But it's very surprising news to hear that.

Bruce Seckendorf (12:31):
Right. I don't know firsthand, but even if it is buttoned up, when you're that large, it's something that you would probably want to review with your estate attorney and with your business manager if you're making that kind of money, once a year at least because your net worth is constantly growing, and the tax laws are constantly changing. So that's important.

Joe Charles (12:52):
So, you just mentioned something that's on my radar as well, music catalogs. Does every artist have a music catalog, or should they have a music catalog and how do they monetize those catalogs? How do they make money?

Bruce Seckendorf (13:04):
Well, I don't do the monetization, but there are companies out there that want to buy it. They'll send in their team. It's really nothing more than what is your share of the songwriting, what your ownership is in the different songs that make up that catalog, right? So, every song is going to be different, your ownership percentage, but what are you actually selling? And then we can get into the whole capital gain. I think most CPAs, most business managers are treating those sales as cap gains. I've heard otherwise from some tax attorneys that we need to structure it a little bit differently. But it hasn't been questioned. You're selling a complete song catalog; it's your asset, it's cap gain.

Joe Charles (13:44):
Interesting. So, I know you also work with some athletes, some NBA athletes, some international athletes. With some of the NBA athletes, one of the things I learned over the years is that an athlete who plays in various states, he's taxed in all the states that he plays in.

Bruce Seckendorf (14:03):
Yes, that actually applies to a lot of artists, and it gets more complicated because they're not on W2, they're just getting a fee per show. So, we have done that with some of the larger artists where if they're doing shows in 15 or 20 different states, we will actually file in those states and many of those states withhold tax. So, you can get some of it refunded or have a small balance due. With the professional athletes, they're getting W2s, they have tax withheld. Some of the states it’s per day that you spend. New York is famous for the 'days of service,’ California does the same thing. How many days were you there as opposed to how much did you earn per game? So, you know, if you're a big-time athlete, you might be getting $35,000 a game. You play one game in Chicago; you're going to file an Illinois return with $35,000 on your W2 with some Illinois tax withheld. And then what happens if you're a New York state resident, you are going to take your entire W2 file in New York State and then take a credit for all the taxes paid to all the other states. So, you might file in 10 different states, whatever your collective tax bill is to those 10 states, apply that tax credit against your New York state tax bill. You're not paying to New York and Illinois; you're really only paying to New York the net number. You're going to get credit for the tax page of those other states. It does complicate the returns, but that's how that works. And the same thing applies with foreign taxes. The big difference, I've had a business manager that was trying to force profit overseas got caught out there.

Again, we're not mentioning names, but when you perform outside the U.S., foreign countries withhold the tax at source. So, it could be the United Kingdom, it could be Japan, it could be Germany or France, wherever you can utilize those foreign taxes against your U.S. tax as a tax credit. But you have to have a profit on that European tour, so to speak. So, if your European tour loses money and they took out the tax, those taxes will not go against your U.S. income tax. You can utilize those foreign taxes as an additional write-off or an expense, but they're not going to reduce your federal income tax. So, I saw a case where they tried to force the profit on the European side to utilize those credits and reduce the U.S. tax, got caught under audit; it wasn't my client, and the whole thing blew up.

So, you have to be careful with that. So that comes down to the early budget. What are you going to make from this foreign tour? How much can we withhold? And that also comes into play where some of my contacts in the United Kingdom in London, they will go ahead and reduce the tax that's going to be withheld for you. They charge a separate fee. So now you have to weigh out is it worth paying them to reduce that tax bill? Do you need it for cashflow? How much are they going to charge? What is the final tax bill going to be? And then apply that to your U.S. taxes. So, it gets a little bit complicated. And the same thing obviously another one is Canada; same thing applies there.

Joe Charles (17:06):
Sounds very complicated. If someone's not paying attention, they could really put themselves in a bad situation.

Bruce Seckendorf (17:12):
Correct. It can be very costly on a large tour; it can be very expensive. I mean ultimately, in a perfect world you want to use those credits. If I have $10,000 withheld in the United Kingdom, I would like to take that 10,000 after changing it over obviously currency exchange from Sterling to U.S. dollars. I'd like to take that $10,000 and reduce my U.S. income tax by 10,000 and the money was paid to the United Kingdom. That's the ideal. If I'm taking it as a $10,000 expense, I'm only saving the tax on $10,000. You know, if you're in a maximum bracket, maybe it's going to be 40%, give or take. California's a bit more, but let's say 40%. So, I save $4,000 in tax versus getting a $10,000 credit. The numbers can be big, and it can be very material how much you can save.

Joe Charles (18:00):
No, this is great stuff. Yeah, I'll tell you from a branding standpoint I travel in a lot of circles. I'm at the ESPYS, I'm at a lot of awards, the Grammys, your name is always mentioned in discussion when they talk about business management firms and CPAs. I hear your name all the time, I just have to laugh, my guy is everywhere, and I know that no one's going to outwork you. There's been times when I've spoken to you, you're in the office at seven o'clock in the morning and I know during tax time you're a machine, you just crank out tax returns all day long.

Bruce Seckendorf (18:37):
Well, I'm basically tax time from January 2nd to the end of tax time, be it April 15th or a couple of days later. I'm generally doing 6:00 AM to 6:00 PM, maybe a little bit more. At my advanced age, I get a little burned out after 12 straight hours of grinding. I can't do the 14 like I used to or 15. Also to your point, some of these shows, been there, done that, you know, gone to Grammy's, go to Grammy parties, I will still go out. But I prefer being behind the scenes and doing the work. I don't want to be out there necessarily partying in that atmosphere. It's not my job. And having done it, I'm the worker guy, I'm behind the scenes. It's where I prefer to be. I'm available. I like fixing problems. It's really what gets me up in the morning. Nobody likes to have a problem for their clients, but I do love the challenge of clients.

I can tell you one funny story that comes to mind about fixing a problem. Again, without mentioning names and the statute of limitations has expired, so I'm clear. But I had a client who was handling his own auto insurance and was driving a very expensive car back in the nineties, coming home from a recording studio late at night, drove under a truck, totaled the car, car is in shambles on the side of the road. Car was about an $80,000 car, give or take, and back then that was pricey. It's an expensive car today. I think the collision on the car was about $15,000 or $20,000, that's all he had covered. So, you as an insurance guy will appreciate this. I called an insurance guy that I knew would be able to get some supplemental insurance, backdating it a couple of days. I think it was only another $15,000 or $20,000. Then called through some of my contacts before music and I had a couple of junkyard connections in the Brooklyn/Queens area. I called them up, I said, look, I've got all these high-end parts on the side of the highway. You want to pick them up, pay us, you can mark them up, take the pieces. They sent over one of their flatbeds, picked up all the pieces of the car, gave the guy another $20,000 - $25,000 and the guy got out. I think he lost about $10,000 or $15,000 on the entire transaction, where he had an 80,000 car with $15,000 in insurance. He was looking at being out $65,000. So only losing maybe $15,000 was a good day.

Joe Charles (20:54):
That's a beautiful win. That's for sure. I'm sure he was very happy.

Bruce Seckendorf (20:58):
Yeah, you have to get creative. I always tell my clients, there's a solution to every problem. Just some solutions cost more money than others. That's all.

Joe Charles (21:06):
That's how it is in this world of entertainment, that's for sure. Nothing's always cookie cutter. You've got to be creative in providing solutions.

Bruce Seckendorf (21:15):
I like to tell people, Joe, it's only expensive if you can't afford it.

Joe Charles (21:19):
Yeah, very true. Well Bruce, it's been awesome having you as a guest today on the Alliant podcast. Happy we're able to do this and for anyone who wants to get in contact with you, what's the best way to reach you?

Bruce Seckendorf (21:35):
I would say my office, it's (516) 488-8400, my extension is 228. My email is Bruce@shrkcpasllc.com. Both of those methods, I'm pretty OCD, so I'm pretty much always here and answering emails and phone calls pretty promptly, as you know Joe, and thank you for having me.

Joe Charles (21:57):
This has been great. You've answered a lot of my questions and I'm sure all of our listeners will appreciate the insight and information you provided. So, I really appreciate your time. Once again, I'm Joe Charles. Thank you everyone for joining our show today and for more information, visit us at alliant.com/sportsandentertainment.

Outro (22:27):
Thanks for listening to today's episode. For more information, visit us at alliant.com/sportsandentertainment. See you during the next episode, and don't forget to subscribe.