Considering some of these pitfalls, what are some the strategies financial advisors can utilize to protect and grow the assets of their professional athlete clientele? The following are four key tips for advisors who aspire to manage money for professional athletes:
- The financial advisor needs to be the gatekeeper. Structure an agreement with the professional athlete upfront that centralizes decision making on financial gifts to so-called friends and family with the advisor, not the athlete. By taking ownership and deciding who gets what and when, the financial advisor may not be popular, but they will be perhaps the only one who has the best interest of the athlete in mind.
- Assume the current contract is the last contract. An athlete is always one serious injury away from retirement, and if their money has been mismanaged, where there was once an endless stream of income is now an untenable flood of debt obligations. Of course, much will depend on the age of the client and the size and length of the current contract, but the key is to build a substantial nest egg that can generate income that will fund a comfortable lifestyle for a lifetime and preserve generational wealth rather than a five-year spending extravaganza. If the contract renewed, then the strategy can be modified accordingly.
- Establish a very clearly delineated monthly budget. With a set of long-term lifestyle goals in mind, earmark maybe 20 percent of their income for expenses and invest the rest, avoiding needless purchases on big-ticket items like a second car, an extravagant home or a handful of other frivolous material goods. Considering that athletes by nature are not conservative in their spending, it can be difficult to lasso them into traditional asset allocation portfolios. It is far easier, however, to raise expectations moving forward than it is to wean a client accustomed to a particular lifestyle off of dwindling assets.
- Don’t try to be their friend. A star struck advisor, one that asks for autographs or tickets to games, may be a bad advisor, likely prone to allowing the client to do things that are not in their best interests. Whether it’s the media or legions of adoring fans, pro athletes rarely hear the word ‘no.’ While you should respect each client, don’t placate an athlete simply because of who they are. This is often easier said than done.
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