I had the pleasure of interviewing a good friend and former professional musician, Kevin Holmes, about the world of financial planning for musicians. Kevin is a rare find–someone who spent more than a decade as a professional musician then transitioned into a successful career as a financial advisor with Ameriprise Financial. Kevin understands the unique financial issues musicians face because he experienced them first hand.
Below is a short question and answer session we had concerning the most common financial pitfalls musicians find themselves in. Obviously, this interview only scratches the surface of this important component of every professional musician’s life. I encourage you to add a comment below with additional questions or contact Kevin directly to discuss how he can help you secure your financial future.
IG: What are the top three mistakes musicians make in preparing for their financial future?
KH: 1) Not acknowledging that they are small business owners.
Because much of their income is generated through self-employment, musicians should consider themselves as small business owners. The key is to adopt a business owner’s mentality. They must allocate specific time among marketing, generating new business, servicing existing clients, keeping up with their craft and performing the job. Consult a tax professional to see if forming an S-corporation or a LLC might be advantageous from a tax and retirement funding perspective. For example, a small business owner or self-employed individual can establish a SEP-IRA, which allow for greater annual contributions than a traditional IRA.
2) Not getting signed contracts.
Many musicians hesitate to ask for a written agreement. Often times they are unaware of the liability and income protection that a contract from a good lawyer can provide. If a composer decides to divide future royalty income streams with another party, a verbal agreement may not be sufficient to legally cement the terms of the agreement. For the best legal protection, regardless of the discomfort it brings, musicians need to obtain a succinct legal contract from an attorney to protect their interests.
3) Not having a plan for their financial future.
Without clearly defined goals, we may be less motivated to save a portion of our current income for a major purchase or retirement. Many people just “save to save” and often wonder “why am I doing this?” This lack of clarity veers us off of a long-term retirement savings strategy or major purchase goal. Younger musicians tend to believe retirement is far away in a distant future and not worth saving for right now. However, this is the most crucial time to fund a retirement savings account. Compounding interest accrues value over time and the best time for a retirement investment plan is when you are relatively young. This allows for multiple decades of potential appreciation.
IG: Are there any common misconceptions about insurance you wish to debunk?
KH: I believe the most important asset we have is ourselves. If we cannot perform, compose or arrange, then we will not earn enough to fund our retirement savings accounts, emergency funds, investment portfolios, musical equipment and studio gear. I see our biggest risk as being the inability to earn due to an injury or illness. Disability insurance designed to replace our current income if we become unable to work is crucial for working musicians. Health Insurance is vital for musicians to help alleviate the financial burden of a major medical procedure. Business overhead insurance, life insurance and long-term care insurance should also be on our short list of policies to consider.
IG: Tell us a bit about what you do and why you care about musicians.
KH: I am a Financial Advisor with Ameriprise Financial but had a career in music for nearly 15 years. Throughout my music career, I encountered a multitude of “older” musicians without any substantial retirement savings. Unfortunately, these musicians need to work long after traditional retirement age as defined by Social Security. Also, many younger musicians become so busy with the daily “grind,” that planning for a secure financial future falls by the wayside. My goal is to educate and create a detailed and comprehensive financial plan to reach the specific goals of each self-employed artist. In essence, I work as a personal CFO for clients to help them develop specific and actionable strategies aimed at achieving their financial dreams and goals.
IG: What is the best way to reach you?
KH: Here is my contact information:
Feiger, Soulios and Associates
A financial advisory practice of Ameriprise Financial Services Inc.
Ameriprise Financial Services, Inc.
3027 Townsgate Rd Suite 205
Westlake Village, CA 91361
Tel: (805) 277 5168
Fax: (805) 277 5156
CA Insurance #0H73287
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