But Why Would You… Not Ask Your Agent How They Handle Your Money?

Third installment in this new series. This series will be made up of short, sometimes very short questions and puzzlements about publishing.

Since the previous column in this series, I’ve gotten a few private comments and a couple of Twitter comments about how I am once again attacking agents. I find that amazing, since I am not attacking agents. I am not. Period.

I am attacking their stupid clients who let them get away with this stuff.

I am attacking writers.

Read my previous post again in this series. It is aimed at trying to get writers to act like business people, to stop being just flat stupid when it comes to hiring agents. I am not attacking agents. I had three good agents over my years. But I sure HATE how stupid writers have become with dealings with agents.

So if you are a writer and think I am attacking agents, you might want to stop and look inward. Are you trusting a real stranger with all your money? Do you really, really know anything about your agent? Have you been to their home, know their finances, since they are handling all of yours? Is their agency a corporation? An LLC. Just a DBA?

Where are their offices? How expensive?

And the most critical question of them all… How is your money handled?

Have you, as the person who hired them, asked your agent that very basic question?

Does your money go into a special trust account as required by fiduciary and agency law? Your money must be segregated and accounted for in this trust account. It can be mingled with other writer’s money in the fiduciary trust account, but the agent can not take his or her rent out of that account.

So ask your agent the basic question if you have not already:

Is my money put into a fiduciary trust account that is segregated from agency general funds and accounted for?

When your check is written out of the fiduciary trust account, the agent should also write himself a check for his 15% at the same time to the agency general fund where rent is paid. If an agent is paying their rent and expenses out of the same account your money goes into, RUN!!!

Again, I am not attacking agents. I am trying to get writers to ask simple, logical, business questions of the person they hired. Just to make sure that the person, the agent, they have handling their money is at least following basic agency law.

Nothing more.

I don’t care if any writer works with an agent, although during this time of change I think it is silly. But it is your career. Just be smart when you hire them, or get smart now and ask your agent a few basic questions.

By the way, when I hired an attorney lately for my friend’s estate, I gave him a retainer. That money went into a special fiduciary account and I get a balance statement on that account on the 1st of every month as I should under law. The attorney is my agent for the estate proceedings. He is handling the money correctly.

Do you even know how your agent handles your money??

Time to ask don’t you think?????

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13 Responses to But Why Would You… Not Ask Your Agent How They Handle Your Money?

  1. JR Tomlin says:

    Good heavens. Frankly, I never even thought of the fact that there should be a fiduciary account. Do agents frequently ignore this?

    • dwsmith says:

      JR, yes, they ignore it all the time I’m afraid. That’s why writers need to ask and hold them to their duties. And if the agent doesn’t keep the money in a fiduciary account that is required under agency law in all states, RUN!!

      Remember, there is no training required for book agents, and most are just English majors and young. Scary.

  2. Important additional to this series Dean. I don’t have much to say about the situation since I don’t have an agent. This is my first time commenting rather than lurking here so I wanted to thank you and your wife for all of the great information about this “new world of publishing.” You’ve revolutionized my thinking and broke wide open so many possibilities. I’m now publishing short stories and eventually novels. Thank you sir.

  3. Here’s a good example.

    Although (due to so much business being done electronically in publishing now) it’s less relevant now than it used to be, it’s long been a custom for many/most literary agencies to deduct certain expenses from the payments which they FWD to clients. Such as the cost of FedEx (if they’ve sent payments or contracts to the client via FedEx), or overseas shipments in pursuit of foreign sales. (Making multiple photocopies of manuscripts for submission used to be a common deducted expense.)

    Well, once of my (four) former agencies spent =more than $700= photocopying and shipping some manuscripts of mine overseas to foreign markets =without asking me=, without discussing that big an expense with me–and expense they then expected me to repay. For (let me add) books they never sold.

    Moreover… when I said that before I’d consider paying such a large expense that no one had bothered to AUTHORIZE with me, I’d need to see an itemized record of the expenses. I also asked for a record of where the books had been submitted.

    Both of these requests were declined–which did not surprise me.

    I left the agency very soon after learning about this. (This wasn’t why I left, though it’s a good example of the long, long, LONG list of problems I had with the way my business was handled there.) I consistently refused to write a check for that money, and consistently declined permission for them to deduct it from any domestic checks owing to me. However, since I wanted them OUT OF MY LIFE, rather than hounding me for years over that sum, I said that if they would finally collect and send me a large and long-overdue foreign check (that I by then despsaired of ever getting), I’d agree to their deducting the $700+ from that sum. And that’s how it worked out.

    Finally, allow me to reiterate that in the above example, I’m not talking about some fly-by-night charlatans. This was/is a high-profile, highly respected agent with multiple hardcover NYT bestsellers on the list, as well as a substantial number of well-known midlist writers. It’s an agency regularly listed as among the “top” agencies in its genre. Most writers considered my then-agent so prestigious, they thought I was crazy to leave. The agent was/is often quoted in trade journals. I’ve seen a participant in THIS BLOG name that agent as one of the “good ones,” someone to whom the warnings on this blog surely don’t apply. Yada yada.

    So no matter WHO your agent is–it doesn’t matter if your agent is crowned in laurel wreathes by the Authors Guild and then has half a dozen NYT bestseller kiss his feet in public–you need to clarify how your money is being handled. And (as I learned to the cost of over $700) you certainly need to set some ground rules.

  4. Chris says:

    For those of you who think Dean is picking on agents as a class, go back and READ CAREFULLY what he said. Then be smart about your choices.

    And I can attest to the fact that he is NOT saying all agents are bad, or that they do the things he described. In fact, in private conversations about specific agents *whose business practices he knows* he has expressed confidence that they are performing their duties in an honorable fashion. But that’s because he (and their clients) knows how they operate.

    What’s that old saying? Trust, but verify.

  5. RE my above anecdote, I predict that Dean will say (a) maybe the $700 was a made-up or exaggerated figure, (b) maybe those MSs weren’t even sent, and/or (c) maybe the long-overdue foreign check that finally turned up at long last had ALREADY been paid to the agency but just not FWD’d to me.

    At the time, I would have disagreed. Not because I had a high opinion of the agency by the time I left, but rather because I would have thought that fabricating expenses and concealing or “misplacing” payments was more risk than it was worth, and more elaborate than made sense.

    But the more I learned AFTER leaving that agency about how my business was handled there, and the more I learned about agents in general (from the many experiences recounted to me in private, as well as my own experiences since leaving that agency)… the more I now believe that (a), (b), and/or (c) are among the realistic possibilities of what was going on in that situation.

    I don’t say that IS what was going on. But I’ve learned enough since those days to realize that those interpretations are not, as I once would have thought, outlandish, absurd, or even improbable.

    • dwsmith says:

      Laura,
      Early on I would have also thought it impossible or highly unlikely for an agent to keep money. Then it happened to us. Then came Enron and good old Bernie M. and I realized it happens at all levels of business.

      And when writers, as a class, give such unbelievable and unchecked and free access to lots and lots of money, someone in the system at some point will get light-fingered for one reason or another. Big agency or small agency, doesn’t matter. No writer knows the name of the people working in accounting in the big agencies. So even if your agent is clean as a new born child, you could still have theft of your money. And most writers will never know it. Ever.

      And that fact stuns me even more.

      I have nothing against using agents. Just be smart, check out someone you are hiring, and ALWAYS split payments. Period, no exception. They can’t take your money if you don’t allow them to get it. Simple fact.

  6. Wonder how many agents ran out today to set up a new account at their bank, counting on writers asking them this question over the next week or so… ;)

  7. Kevin wrote: “Wonder how many agents ran out today to set up a new account at their bank, counting on writers asking them this question over the next week or so…”

    Oh, Kevin, you cock-eyed optimist.

    Literary agents who do not have ethicl agency banking set up will, if asked, simply deny that it’s necessary–and will even deny that it’s a common or apprporiate practice among responsible literary agents.

    If they were going to do the thing properly, they’d already BE doing it properly. If they’re not doing it properly, they’re not going to change on the basis of Dean blogging about it or a client (or potential client) asking them about it.

    In a related vein, one of my former agents (to reiterate: not an obscure charlatan, but a highly reputable, well-known agent whom I was widely considered lucky to get and foolish to fire) has consistently refused to agree to split payments ever since I left the agency, even though splitting payments is a standard practice with ex-clients (and, in this case, a necessary one, since I’ve had continual administrative problems with the agency ever since becoming a FORMER client). This agent’s “rationalization” for refusing to consent to split payments is that (wait for it!) it’s a wholly unprecedented, unknown, never-before-tried practice and a completely bizarre, eccentric suggestions that publishers would find puzzling and strange, and he is not going to fly in the face of decades of well-established tradition to do something so outlandishly unprecedented as, er, let an EX-client’s 85% be sent directly to -her- instead of to -him-.

    Not only has the agent written this specious, idiotic, demonstrably false exucse to me to justify refusing to consent to split payments, this agent has (since I have pursued and pursued and pursued this) written these same comments to the Board of Directors of Novelists, Inc. (who contacte the agent on my behalf), the ethics committs of the Association of Authors Representatives (with whom I filed a formal complaint against the agent, along with several other former clients having the same problem), the Agent Relations Committee of RWA (who contacted the agent on behalf of me and several other RWA members having similar problems with the agent), and my lawyer–who has by now confronted the agent multiple times about this ongoing problem.

    NINC, RWA, and my lawyer all wrote back to the agent to point out that the argument was absurdly specious, because splitting payments with ex-clients is a WELL-established and very common practice. The agent ignored these letters.

    And the AAR, running ever true to form, simply let the agent’s absurd argument stand without challenege or comment, and told the agent wasdoing nothing wrong whatsoever. Which is all the AAR ever says about any of its members. (The AAR is toothless. Even its own members have said so to me.)

    A long-winded way of saying, Kevin… you think an agent behaving improperly or unethically will change habits because of a blog commentary or because someone ASKS about his/her practices? Oh, if only it were ever so. (sigh)

    • dwsmith says:

      Yeah, what Laura said. I’m not trying to change agents. I’m trying to get writers to think like business people, get out of the silly training that having an agent, any agent, is a good thing AT ALL TIMES, and protect themselves. Writers need to first control their own money. Period. If you think of an agent as an untrained stranger, you will trust them a lot less, especially when the money starts getting big.

      One major problem is that new writers think any agent is better than no agent. Actually, as Laura and I and others have pounded home, a bad agent, or one that flat takes your money, is far, far, far worse than no agent. In fact, I also had top agents and I am so, so, so much better off without an agent than I was with one.

      But that said, I would have been hard pressed to believe that when I was a young writer and deep into the myth that I needed an agent and that they were all good. Sometimes an agent can really help. My agent of 17 years helped me a lot chase money, helped me a in a few times when I needed my butt kicked, and yet never sold a book for me. Did that agent ever earn 15% of the money I made??? Nope???

      Did that agency take my money at times? Not a clue, to be honest, since I also didn’t wake up for a time and split payments.

      We need to make splitting payments a common practice, and thus take, as Shawn said, the opportunity away from them. Just better and smarter business.

  8. Shawn says:

    They say that embezzlement is a crime of opportunity. It doesn’t matter how much you trust someone, how “good” a person they are. If a person with access and opportunity hits hard times, temptation may be too strong to resist. It doesn’t make that person “bad”; it just reveals their breaking point when desperation hits them.

    There’s a reason why church secretaries & the treasurers of small non-profits or clubs or chapters of bigger organizations often get in trouble. The organizations are small, there’s often not enough staff to segregate money management so that acceptable internal controls can be put in place. The people handling money are personally known, trusted as friends, as decent & ethical people into whose personal financial business it would be “rude” to inquire. There’s easy money that comes in (from an event hosted by the group, from the collection plate, whatever), in cash, & maybe there’s an unexpected bill. “I’ll just borrow it and replace it next week. No one will ever know.”

    And down the slippery slope they go.

    The agencies may have good internal controls to protect the CORPORATION’S assets. But I can clearly see how if writers don’t insist on the same protections for THEIR assets as held by the corporation (agency), there are no internal controls and it’s back to the world of easy opportunity.

    At least with the church secretaries & little clubs, somebody else in the group/organization will finally see a bank statement and say “oh wait, here’s a problem …”

    With an agency, it doesn’t sound like writers even have the option of looking at bank statements or publishing house statements. And depending on how their contracts are written with both the agency & the publisher, they might not even be able to get their mitts on the documentation from the publisher.

    I can feel sympathy for the embezzler who is desperate and means well and really does plan to put the money back. But my experience is that things never get better enough. And if it’s my money they are using, money that I worked hard to earn, well, no matter how sympathetic I am, I want my money back & the embezzler will have to deal with the consequences of committing a crime.

    As a writer, I appreciate you all (Dean, Kris, & experienced commenters like Laura) pounding the basic doctrine of “learn business & common sense” into my head. I want to earn money for myself through my writing. If I’m going to pay other people to help me, I want to be the one in control of how much & when those people get paid, and I don’t want my money stolen.

  9. someone says:

    Not agent-related, but related to embezzlement as a crime of opportunity.

    I read in the paper several yeas ago about a local business that discovered that their bookkeeper had embezzled an insane amount of money from them over the course of a number of years — but they weren’t able to recover a dime, even though she was convicted, because she was insolvent. ALL the money had gone to lottery tickets.

    First, she tried to use the lottery to solve her financial problems. Then she started “borrowing” money from work to spend on the tickets, with the intention of paying it back “when” she won. The more she stole, the more desperate she was to win so that she could pay it back, so the more she stole to spend on the lottery….

    She cumulatively stole several times what she would have needed to solve her financial problems directly. But it all went to the gambling addition, because she was determined to win enough to pay it back.

  10. Shawn wrote: “They say that embezzlement is a crime of opportunity.”

    Courtney Milan offered a strong, simple analogt when talking about conflict of interest (viz agents setting themselve up as their clients’ publishers), when she was explaining the concept of business ethics:

    The best way to ensure you don’t binge on cookies is not to keep cookies in the house; once you’re keeping cookies in the house, the possibility of going on a cookie binge always exists, no matter how good your intentions.

    Likewise with literary agents–who have no fiduciary training, licensing, or effective oversight–handling their clients’ money.

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