Timothy James & Partners has become well known for looking after business owners, the self-employed, entrepreneurs and those in the media sector. Whether they are in front of the camera, directing from behind the camera or the one actually holding the camera, all of my clients have different requirements.
When people hear I work with those in the film industry, they imagine A-list film stars earning millions. But, while there are clients who do very well, the majority have the same financial worries as everyone else; with the added anxiety that their income can be drastically different from one year to the next.
On the fringe
A young actor, for example, might be looking for their first mortgage. They are often sent my way because their agent or accountant knows there are difficulties involved in getting a bank to look beyond the standard lending criteria.
How will a high street bank look upon a mortgage applicant who earned £80,000 this year but earned £8,000 for the previous two years? Not very favourably in the main.
There are, though, lenders who will try to understand the overall financial situation, not just those who all-too-seriously mimic a Little Britain sketch by responding ‘computer says no’. There are lenders who understand the reality of the thespian struggle.
According to the acting trade press, on leaving drama school, having paid upwards of £27,000 for the privilege of attending, graduates are met with the stark reality that more than 80% of them will earn less than £10,000 per year. Furthermore, 90% of the workforce is not employed in the industry at any one time.
Explaining in detail the risks involved with taking on debt is paramount, regardless of the client’s professional situation.
In the UK we still view home ownership as a benchmark for success. Last month’s decision to raise interest rates by 25 basis points will do little to abate the appetite to take on large liabilities to get on the property ladder.
If a client is confident their income will make a mortgage affordable and they understand the risks, there is no reason why they cannot join the 365,000 first-time buyers a year doing the same thing.
Clients at the other end of their career might have different concerns. The primary concern of one client, who I met for the first time in 2016 before the Brexit referendum, was how and when to bring his US dollar-denominated assets back to the UK. He had been filming in the US for a few years and had built up significant amounts of cash.
Without a functioning crystal ball I did not foresee the plunge of sterling just around the corner so it was just good fortune he was still holding the dollars on 23 June. Working with the client’s accountant and understanding the tax position meant we could deliver an efficient solution.
Many people in the entertainment sector will build up royalty income that will be paid for many years after they have stopped working. This is useful ‘pension planning’ in itself.
This income can be sold for a lump sum or inherited by beneficiaries. It may benefit from business property relief.
With the feast and famine nature of the film world, saving for retirement is something I encourage all my clients to think about as soon as they can. This includes saving into a pension, using their capital gains from their general investment account to ‘bed and ISA’, and contributing as much as is affordable to take advantage of compounding.
These are conversations I have on a daily basis with the goal being that my clients can focus on their own art without having to worry about their finances.
David Stead is a financial adviser at Timothy James & Partners