Southpac targets California sports & entertainment wealth

Southpac Group is expanding into Los Angeles, marking the Bay of Plenty financial services firm's entry into California's sports and entertainment market.

The firm administers more than $6.8 billion in assets and plans to target wealthy clients, including professional athletes and entertainment figures. Its move into the US follows approaches from American lawyers seeking asset protection options for clients whose wealth has grown quickly.

In California, Southpac will initially focus on building relationships with lawyers, accountants and wealth advisers who already work with sports stars, Hollywood figures and other high-net-worth individuals. The firm sees those advisers as a pathway into a market where clients often accumulate substantial assets at a young age.

Mike Arand, Chief Executive Officer of Southpac Group, said California stood out for both its wealth base and its advisory networks.

"We are seeing increasing interest from advisers whose clients can accumulate substantial wealth very quickly, but whose asset protection measures may not have kept pace with that growth.

"California is a natural market for us because it combines enormous concentrations of private wealth with a highly developed legal and advisory sector. Our strategy is to build relationships with the lawyers, accountants and wealth advisers already working with these clients and able to identify when more robust asset protection structures, such as international trusts, may be appropriate," Arand said.

The expansion reflects a broader shift in professional sport, where top athletes are earning more money, often earlier in their careers. Industry figures cited by Southpac show the world's 50 highest-paid athletes generated about US$4.1 billion over the past year, up from US$1.9 billion for the equivalent group in 2017.

More than half of the current top 50 are under 30, and their combined off-field earnings reached US$1.1 billion. Those earnings increasingly come from endorsements, investments, business interests and other commercial activity alongside salary and prize money.

Young wealth

Matthew Smith, a lawyer at Southpac Group and Director of Business Development, said that mix of income sources can quickly make an athlete's financial affairs more complex.

"The modern professional athlete can look as much like an entrepreneur as a highly paid employee. Alongside a playing contract, there can be property, private investments, equity stakes, endorsement income and direct ownership interests in businesses.

"That creates more opportunities to build wealth beyond sport, which is obviously positive. But it also means more moving parts in their financial lives and more places where a commercial dispute or legal problem can arise," Smith said.

Discussions with US advisers have identified professional baseball, basketball, American football and ice hockey players as possible clients, Smith said. He said the main risk is often not tied to incidents during competition, but to the business and investment activity that can follow a rapid rise in earnings and public profile.

That can include property purchases, private ventures and investments introduced through wider personal and professional networks. For younger athletes in particular, the scale and speed of change can be difficult to manage even with professional advice.

"Someone can be 18 or 19 and suddenly be earning millions of dollars a year, and with that change in circumstances there can also be a very rapid increase in the number of people approaching them with opportunities.

"They may start buying property, taking interests in businesses or investing in private ventures through people in their wider network. And while most will have good advisers around them, their financial affairs can still become very complicated in a relatively short period.

"The issue is not that these people do not understand money. It is that their level of wealth and the complexity around it can increase much faster than would normally happen for someone building assets gradually over 20 or 30 years," Smith said.

California market

California also presents a distinct legal backdrop for wealth planning. Economic analysis cited by Southpac estimated the state's annual tort-system costs at about US$72 billion, with California ranking among the highest in estimated tort costs per household in the US.

That environment, combined with large concentrations of private wealth, helped shape Southpac's decision to establish itself in Los Angeles rather than elsewhere in the US. The firm is targeting advisers whose clients already consider litigation risk as part of managing property, investments and business ownership.

"California has an extraordinary concentration of private wealth across a number of sectors, but it is also an environment where litigation risk is something advisers and their clients are already accustomed to thinking about.

"When those two things come together, asset protection becomes a much more relevant part of the wider conversation, particularly for people who have significant property holdings, private investments or business interests," Smith said.