Helping athlete and entertainer clients navigate family obligations

Financial advisors seeking to preserve the newfound wealth of athlete and entertainer clients face a tough question of how to support the friends and family who helped them make it big.

On the one hand, the friends and family “were there from the beginning — before fame, fortune and multi-million dollar deals”; on the other, the money in those contracts is finite and “requires a thoughtful strategy and discipline,” according to a white paper released June 14 by the Athletes and Entertainers Strategic Client Segment of UBS. Led by Wale Ogunleye, a former Pro Bowl defensive end with the Miami Dolphins and Chicago Bears who is now UBS Global Wealth Management’s head of sports and entertainment, the firm aims to assist advisors with the quandary of paying it forward to loved ones without threatening the athlete’s financial security.

Athletes and others obtaining a great amount of wealth at a young age also face the threat of fraud schemes that target them all too often. Advisors risk losing the major clients if they dismiss their desire out of hand to steer some of the new incoming resources to the families, friends or communities that had their backs. It’s a niche in the field often served by former athletes themselves with a first-hand understanding of the complexities.

“It's probably one of the hardest things that an athlete or an entertainer who comes into sudden wealth has to come to grips with: How do I say ‘no’ to an uncle who may have been the first person to buy me a pair of cleats or the aunt who bought me a guitar? It’s just a difficult conversation to have,” Ogunleye said in an interview. “You're looked at as a hero, and now you want to fulfill or live up to that hero status, not just in front of the cameras, but behind the scenes. It’s extremely hard to say ‘no.’”

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Ogunleye earned an MBA from George Washington University and began working at UBS in 2019 after his 11-year NFL stint, but many athletes, musicians or actors struggle to find new careers after their initial brushes with fame, he said. The newfound fortune may run out faster than they could have imagined, as well. 

For example, take an illustrative case study from the UBS white paper about an NFL player who earns $10 million over a four-year contract while living in California and playing in a city or state that charges a “jock tax” on money earned in the jurisdiction. After taxes and other expenses like an agent fee, the athlete took home less than 40% of the pay at $3.85 million.

Giving back to communities and sustaining friends and family are “all very admirable goals, but you still want to carve out assets,” said advisor Lee Rawiszer of Westport, Connecticut-based Paradigm Financial Partners, which works with a lot of athlete and entertainer clients. Today’s stars could be the “next Paul McCartney or the next Vanilla Ice,” Rawiszer said.

“We try to stress that we don't know how long their career is going to be,” he said. “We don't know how long the gravy train is going to last, so we have to preserve those assets.”

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The topic of friends and family reminded Rawiszer of other potential pitfalls relating to lawsuits or divorces, which he said makes prenuptial agreements a must. Other areas of concern cited in the UBS research include private foundations run by family members and friends lacking in expertise and loans that never get repaid. Stars must “set clear boundaries” about the people they consider themselves responsible for supporting financially, according to the report.

“They start with themselves, their spouse and children, bearing in mind they may never work again after their careers in professional sports and entertainment,” according to the report. “Caring for their own parents is also important to many. Once stars have a financial plan in place for their inner circle, they can decide if they want to help other family and friends without jeopardizing their own financial wellbeing. A best practice is to define parameters for gifting money, including naming specific individuals, situations and dollar amount limits.”

Regardless of the exact approach, advisors should expect the issue to come up and engage with it in a constructive manner rather than rejecting the notion outright or viewing it through a corporate lens, Ogunleye said. That starts with giving the clients a healthy dose of knowledge about the actual worth of their big contracts and advisors getting an understanding that clients and prospects may not trust them as much as they think, he said.

“If they refuse to find ways and solutions to deal with this, they're going to be fighting an uphill battle,” Ogunleye said. “Our clients need to understand that this is not a sprint, it's a marathon. But the advisor needs to explain that to them in a way that they can digest.”