Car dealerships, restaurants, investment schemes, nightclubs. There is no end of things professional athletes can find to spend their quickly earned millions on.
But financial advisors to these hard-driven, high-profile individuals are the ones who have to screen the deals and tell clients which are real opportunities and which are expensive lemons.
And if the advisor is wrong, he or she may end up as a defendant in a lawsuit.
However, there are ways to help professional athletes avoid the kind of financial meltdowns that grab headlines, say advisors who work with athletes.
“An advisor has to recognize that athletes are trained to ignore risk,” says Michael Delgas, managing director of Sontag Advisory in New York City. “There may be a 90 percent risk they will get injured during their career, but they have to ignore that and get out on the field anyway. Think of any halftime speech by a coach and then put that speech in the mouth of someone pitching an investment idea to them.”
It may be hard for the athlete to say no, especially if it is a relative or friend pitching the “once-in-a-lifetime” deal to them, says Ron L. Brown, partner at Athlete Essentials Group, a financial services firm specializing in advising professional athletes based in Lexington, Ken.
A financial advisor has to convince the athlete clients to take a very different approach to their portfolios than they do to their professional lives, but the advisor has to realize that risk-taking is part of the athlete's mentality, Delgas says.
“You don’t want to be the bad guy and shoot every idea down just because it involves something an advisor might not usually deal with,” Brown says, “and you want to treat the client with respect. The best thing to do is to lead the client to decide that the investment proposal is a bad idea.”
Brown says one of his NFL clients wanted to invest in a doughnut company in Canada that his friend in the Canadian Football League pitched to him.
“He told me they were the best doughnuts he had ever eaten and that the customer lines were out the door,” Brown recounts. “I asked him if the company made any money and we discussed it from there.