The challenge of financial planning for elite athletes

Short careers, long retirements, and investing misconceptions are just some landmines advisors must navigate

The challenge of financial planning for elite athletes

To advisors who are just starting out with ambitions of serving high-income clientele, professional athletes might sound like dream clients. But more experienced professionals are aware of the drawbacks that come with their unique financial situation.

While they stand to earn millions of dollars from lucrative contracts, such athletes tend to have short career arcs and long retirements. As noted in a Wall Street Journal article, this means financial advisors have to structure a portfolio to amass a big-enough nest egg while generating sufficient income to address immediate financial needs — particularly important for those who encounter a career-ending injury or slump in performance.

“There is nothing better than earning a large amount of money at a young age,” Dan Goldie, financial advisor at Buckingham Strategic Wealth and former pro tennis player, told the Journal. “The money can compound for decades longer than money for most people.”

Many advisors recommend a portfolio with income-generating bonds, with riskier assets like stocks and alternative assets providing long-term wealth creation. But some athletes have the mistaken notion that stocks are bad investments, overreacting to one-day drops and overlooking longer upward trends.

Goldie reportedly advises many of his clients to have a 70%-75% allocation to stocks and alternatives with the rest going to bonds; that skews more conservative than most twentysomethings’ portfolios. The Journal said that another advisor, Karim Ahamed at Chicago-based Cerity partners, counsels his tennis player and golfer clients to put 10% to 12% of their portfolio in cash, as opposed to 5% for many young people.

“Athletes won’t look on you kindly if they have expenses and you say all their money is invested,” Ahamed said. Cerity’s older, wealthier athlete clients are also placed further out on the fixed-income risk curve out of necessity, given today’s low interest rates.

At OFS, a company whose clientele includes over 200 professional sports players, a large chunk of portfolios are put in passive stock funds. Once a portfolio reaches US$7.5 million, the firm explores alternative investments in hedge funds, private equity, and venture capital, with lock-up periods that can last anywhere from seven to 10 years.

Given their popularity and financial stature, athletes tend to receive invitations to become direct stakeholders in restaurants or other private companies. According to OFS Managing Director Frank Zecca, convincing such clients that private equity or VC funds are a more effective option can take a lot of effort.

“A lot of athletes are susceptible [to unsound business propositions],” Ahamed said. “They put their money into a ‘no-lose’ investment that goes down the drain.”

For that reason, Ahamed said, advisors must establish a trusting relationship with their clients — especially in case a decision they made behind their advisor’s back doesn’t pan out.

“They have to feel confident that you will look out for their interests,” he said. “And all clients are afraid of looking stupid. Sometimes you have to read their body language.”


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