Advisors usually jump at the chance to sign individuals with mammoth windfalls and ultra-high incomes virtually assured by lucrative multi-year contracts.
Yet when these prospects are big-time professional athletes, some advisors may hesitate for the same reasons they’re sometime reluctant to serve celebrities in general: Such clients tend to possess less financial literacy than those who become wealthy from business, may be difficult to work with and may lack discipline, spending like there’s no tomorrow. And after going off the rails of their financial plans, these clients may expect you to clean up the train wreck and (futilely) attempt to prevent the next disaster.
Yet for advisors who learn to understand and manage them, serving this clientele can be highly rewarding, especially for advisors who pride themselves on building trust and crafting holistic solutions. Getting and serving athletes as clients may mean learning or improving client relations skills and new planning skills to meet the unusual challenges facing these suddenly wealthy young men.
Theirs is not the problem of having enough income, but one of having a tremendous amount during their youth that must be marshaled to last long after they can no longer play. Instead, unrestrained spending—on cars, helicopters and jets--could consign them to a fate that, sadly, is all too common. About 80 percent of retired NFL players go broke within three years of leaving the league, according to a Sports Illustrated survey. And many NBA players are in financial trouble even before they retire.
Here are some pointers on how to help athletes avoid this fate:
• Take extra time to understand them and engender trust. Many newly minted sports icons are from impoverished backgrounds. They often come to their newfound wealth with an entourage and want to put these friends on a payroll of sorts. Most don’t know the difference between real investments and speculative business ventures, income and capital, salesmen and advisors.