Wealth management companies are experiencing a new gold rush as a result of high compensation for elite athletes and expensive contracts for collegiate athletes.
The enormous wealth being generated by professional players and the prospects for wealth management companies managing their investments are highlighted by Juan Soto’s $765 million contract with the New York Mets of Major League Baseball. The number of pro athletes and their wealth have made sports a major factor in the growth of wealth management, with women’s sports on the increase and collegiate athletes now earning six or seven figures for their name, image, and likeness.
Molly Cloud, Morgan Stanley’s director of sports and entertainment and financial advisor, stated that the figures have skyrocketed. Ten years ago, there would have been a lot less money. Being a part of that growth adds complexity and excitement to our work.
Wealth managers, including multifamily offices like Rockefeller Capital Management, private equity firms, and longstanding industry leaders like Morgan Stanley, Bernstein, UBS, and Goldman Sachs, are growing their sports and entertainment divisions and hiring former athletes to attract new clients.
Former hockey player James Beale now serves as the development director for the Sports and Entertainment division of Rockefeller Capital Management’s Rockefeller Global Family Office. According to Beale, having prior athletic expertise is beneficial, even though athletes aren’t all that different from other wealthy clientele.
Many of my buddies in [sports] may not have spent enough time being mindful of their money. That put them in a difficult situation. Therefore, being aware of it and attempting to assist others in avoiding such setbacks earlier in their careers has put me in a good position within the athlete network as a whole, Beale said.
According to Beale, athletes, like other wealthy individuals, frequently devote the majority of their time to their careers or businesses and have little time for investment.
According to Beale, they devote 99 percent of their time to training, maintaining their health, and caring for their bodies. This is a lot like an entrepreneur who devotes all of their time to their firm. As a reliable partner, we assist them in handling their money so they may return to their trade.
However, other counselors to affluent sportsmen claim they face particular difficulties. Athletes generate their largest windfalls early in life, in contrast to most wealth makers who build their fortunes as they mature. There are unique hazards involved in handling millions as a twentysomething or, increasingly, as a youngster.
According to Stacie Jacobsen, national director for client engagement and co-lead of the sports, media, and entertainment department at Bernstein Private Wealth Management, they are making more money at a younger age than they will ever make in their lifetime. They virtually have a different relationship with money than most of the other people we work with.
For pro sportsmen, education is crucial because of their relative young. According to Jacobsen, sportsmen are accustomed to projecting confidence, therefore they frequently feel awkward when questioned about investing.
She answered, “Yeah, I got this,” with a certain feeling. In reality, they don’t behind the scenes. I must be honest, so I’ll ask: Do you have any further questions on these topics? Or would you like to learn more about that?
Their age and hyperfocus on their careers make pro athletes easy prey for scams, frauds and bad investments. MLB phenom Shohei Ohtani discovered $16 million had vanished from his account. His interpreter laterplead guilty to stealingfrom Ohtani s accounts to cover gambling losses.
A 2021 report from EY found that pro athletes lost nearly $600 million between 2004 and 2019 due to fraud.
Taxes are another big challenge for pro athletes. The so-called jock tax, where athletes often owe taxes to states where they play or earn income, can be complex and time-consuming to calculate. Wealth advisors say they work with athletes to keep detailed records and plan the best tax domicile.
Advisors say their biggest job in working with pro athletes is helping them say no. Whether it s friends or family pitching them investments, or an impulse purchase of a $400,000 Lambo or $800,000 Richard Mille watch, young athletes are vulnerable to costly decisions.
If one of my clients comes to me and says, I want to buy this car and it wasn t in our original financial plan, I will say, Not yet, Jacobsen said. Or I will say, OK but here is the impact of that purchase on your financial plan and it may take longer to achieve the priorities you originally set out.
When clients come to her with investments recommended by friends or family, Jacobsen helps them get more information on the business and do proper due diligence. The same goes for real estate.
If a client says, I want to buy this house I just saw, I ll say, Why? Is it good value? Who s going to use it? What s the long-term investment strategy? she said.
Pro athletes used to become partners in restaurants, car dealerships and other consumer-facing businesses that benefited from their image, whereas today s young athletes want equity stakes in fast-growing tech companies with board seats. Crypto and artificial intelligence are also popular, advisors say.
Ultimately, being a wealth advisor to pro athletes is about preparing them for life after the game. Many careers are short and unpredictable, especially in the National Football League. Advisors say they have to be the biggest cheerleaders for their clients while they re playing, but also plan for the inevitable.
That includes everything from the investment plan to building a second career to negotiating long-term brand deals and income-generating assets.
They realize this is likely their best shot at creating significant wealth, Jacobsen said. They re taking it seriously, developing a professional team and starting to get involved and ask the right questions.
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