Registered investment advisors emphasize that education and a hands-on approach are key to winning athlete clients as they compete with wirehouses that have dedicated units to woo sports pros.
“A lot of times they see their paychecks coming in, and they’re so incredibly high, they think that it can’t stop,” according to Nate Johnson, vice president at CW Boss, an advisory practice within Cyndeo Wealth Partners that caters to athletes and entertainment clients.
The top five draft picks in the National Basketball Association, National Football League and Major League Baseball are 21 years old or younger, according to data from Spotrac, an online resource for sports team and player contracts.
The four-year contract of Cade Cunningham of the Detroit Pistons, for example, is valued at nearly $46 million, the data shows.
Johnson reviews player contracts with the athletes and highlights the portion of their pay that’s guaranteed. Then he gives a version of this wake-up call: “If you’re only going to make this certain amount over the next five years, this is how much we need to save to make sure you can live the rest of your life.”
Working with athletes is “a lot more communication-intensive” because those Johnson works with tend to be young and experience sudden influxes of money.
It involves significantly more handholding, day-to-day communication and assistance with cash management issues, he says. Johnson says he and his partner, Adam Hess, have $185 million in client assets, and about half is from athletes.
Basic things that may be familiar to most people — such as paying bills, buying a car, reviewing an apartment lease or making wire transfers — may be foreign to athletes with big paychecks, he notes.
Thinking of life after sports even at the height of their careers
Steve Trax, co-head of RIA firm MAI Capital Management, says he tries to get the athletes to think about life after sports. MAI has a division dedicated to serving athletes and entertainers dubbed Sports + Entertainment, and it so far has more than $3 billion in client assets, Trax says.
“From the very beginning, we start educating our clients to make sure they use the game and don’t let the game use them,” Trax said.
Trax says he emphasizes budgeting, making needs over wants. And he tries to tell it like it is.
The athletes’ family, friends and coaches “can oftentimes tell them what they want to hear, not what they need to hear,” Trax said, noting that as their advisor, he feels the need to do the opposite.
Trax believes that the RIAs’ fiduciary obligations to clients make them better suited than wirehouses when it comes to serving athletes.
“Our position in the market as an RIA is imperative. You cannot serve this client the way they need to be served in any other structural format,” he said.
Wirehouses have been aggressively pursuing professional sports and entertainment clientele and helping their advisors with training and prospecting.
Merrill Lynch in May designated a program for wealth advisors serving sports and entertainment professionals from the College for Financial Planning. Merrill has exclusive access to the program through May 2022.
Morgan Stanley’s global sports and entertainment division announced in January that it was the exclusive financial education partner of the Reese’s Senior Bowl, an annual college all-star football game, for the seventh year in a row. In August last year, Morgan Stanley announced that the division was named an official institutional financial advisor participant of the NFL Players Association.
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