Working with professional athletes – whether they play for the NFL, NBA, WNBA, MLB, NHL, MLS, NWSL, MMA, WWE or another sports league – presents unique challenges. Every athlete has a different career timeline and goals. And every athlete tends to have a different support system.
To understand what advisors need to know when working with professional athletes, SmartAsset spoke with several financial advisors who work with clients in the sports world.
For these clients, the stakes are particularly high. “The margin of error is incredibly small,” says Tyler Martin, certified financial planner, certified private wealth advisor and director of financial planning at Stonebridge Wealth Management.
“The difference between a ball and a strike is about the same margin an advisor gets in this space,” he adds. “Client experience and execution are crucial.”
Read on for what advisors need to know when working with professional athletes – and what lessons they can apply to their regular, non-athlete clients.
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Understand the Client’s Career Timeline
While an athlete’s career timeline varies, it can last just a few years in high-impact sports such as football.
“The biggest challenge of working with professional athletes is not the ‘possibility,’ but rather the certainty of a relatively short career and early retirement,” says Peter Palion, certified financial planner and founder of Master Plan Advisory Inc. “This challenge is compounded by the temptation engendered by large earnings.”
Any advisors who work with clients should understand their retirement timeline, the unique health, career and risk characteristics that could impact its length, and make planning recommendations based on those factors.
“The main benefit of working with an experienced and objective financial planner is to have a voice of reason and guidance for the long term (ie., past the end of the career, which oftentimes may be shorter than expected due to injury),” Palion says.
Be ‘a Gatekeeper’
Another obstacle arrives when advisors deal with an athlete’s inner circle. Members of the athlete’s ingroup may downplay your input as an advisor.
“The biggest issue for advisors working with athletes is that there are usually a number of other people trying to insert themselves into the process,” says Marty O’Leary, a former college football player who is currently a certified financial planner and chartered financial consultant at Stadium Financial LLC.
“Some have the client’s best interests in mind, but some do not,” he adds. “So you need to act as a gatekeeper and not be afraid to tell those people ‘no’ without the athlete’s input.”
Approach New Investment Opportunities Skeptically
Athletes often seek opportunities to make money outside their sport. That can involve investment opportunities, marketing deals or partnerships.
Of course, any investment comes with risk, so how should an advisor help athletes approach the opportunity?
“With caution and a high degree of skepticism,” says Martin, of Stonebridge Wealth Management. “Athletes and entertainers are constantly approached with new investment ideas. I’ve seen anything from venture capital to a start-up making a countertop Jello shot dispenser.”
Advisors have the opportunity here to help steer clients in the right direction.
“When looking at more speculative investments, we try to create guardrails in place so that if one of these ‘deals’ fails, it’s not going to break their overall plan,” Martin says.
Handle Large Windfalls
When an athlete receives a large contract from the professional sports team for which he or she plays, it’s life-changing. But clients need strong support to ensure that a windfall is handled wisely.
As an advisor, you have the opportunity to create a financially healthy structure. This will help the athlete succeed and sustain long-term financial wellness. And setting up plans for the future is a great way to start.
“When cash flows come in, every dollar should be allocated based on a plan to accomplish the athlete’s specific life and wealth goals,” Martin says. “If a plan isn’t in place, the money can be frivolously spent. We’re all victims of income creep, but it can be especially damaging for athletes with short careers.”
Advisor Takeaways
When it comes to advising professional athletes, the stakes can be more intense, the career timelines may be shorter and the payouts may be bigger. But there are still lessons that advisors of non-athletes can take from the world of advising athletes.
Advisors can often be the voice of reason and act as the quarterback of their clients’ financial lives. Both athletes and non-athletes need direct, quality support from an advisor, no matter their tax bracket.
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