Need financial planning advice but don't know where to look? Here are some options to investigate.
But after the champagne bubbles fizzle out and the celebration is over, some tough financial choices must be made. Have you thought about disability insurance, or whether you should invest 40 percent or 60 percent of your money in stocks, or in bonds? Should you buy that sports bar, or an annuity? What about deferred compensation?
Many athletes don't even get to these questions because they assume they'll worry about it later, down the road.
"The biggest mistake an athlete can make is saying I'll invest for the next contract" said Frank Zecca, the head of Advantage International's financial planning unit. "But there may not be another contract."
For many athletes, the gloom and doom warnings may be obscured by other pressures: friends and family need help; a new lifestyle must be funded, and there may be businesses to invest in.
Most financial planners agree, however, that unless an athlete puts his or her financial house in order first, friends and family will not be helped in the long run.
For the athlete looking for help, there are a wide array of choices: agents, banks, and specialty financial firms that cater to athletes. Here are six prominent choices to turn to for financial planning.
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Firstar Corp, Cincinati, OH. First what? Unless you live in the Midwest you may never have heard of this company - which until recently went under the name Star Banc- but it is one of the few banks to offer a national financial planning program for athletes. Started in 1994 when the Bengal's first-round draft pick Dan "Big Daddy" Wilkinson asked for help, it has grown to more than 80 athletes. The man you want to talk to is Jon Hayes, who manages a 10-person division that handles the athletes. The group provides everything from traditional brokerage investing in stocks and bonds, to lending.
Few banks will actually lend to athletes because they don't have a typical credit background, but Firstar will, Hayes said. In fact, the bank just extended credit to several NBA players hard up because of the lockout, including one $2.1 million loan.
The bank also has a program for college players heading to the pros that pays for their disability insurance. Hayes can be reached at (513) 632-2999.
Merrill Lynch & Co., New York, NY. Unlike Firstar, most everybody has heard of Merrill. The brokerage created a financial planning model for athletes, and has even performed an internal study on athletes and investing.
Terry Gunning is a senior financial planner who created the model, which is similar to one the firm uses for entertainers and lottery winners. She stresses disability insurance, tax-deferred compensation, and savings. Many athletes surprisingly do not have disability insurance, she said, even though they can obtain coverage through players associations.
"If they have endorsement income, that is considered self-employment, so they can set up their own retirement plan," she added. Also, deferred compensation is a great idea because pay can be spread out into nonplaying years when it may be taxed at a lower rate.
Deferred compensation has gotten some bad press lately because of Mario Lemieux's problem with the now bankrupt Pittsburgh Penguins, so Gunning said it is important that an athlete first check out his or her team's financial health before agreeing to deferred pay. Gunning can be reached at (212) 449-1000.
Bankamerica Corp., Charlotte, NC. This national bank holding company, created by the merger of NationsBank Corp. and BankAmerica Corp., has a financial planning program for athletes that not only provides the traditional investing options, but which also will help set up checking accounts, payroll deductions, and even bill paying.
The program was started three or four years ago after company chief executive Hugh McColl suggested it, and has expanded along with the growing bank. Contact Susan Walker at (904) 791-5608.
Advantage International, McClean, VA. Advantage is one of several agent houses that provide financial planning for athletes. IMG and David Falk are two other noteworthy examples.
Frank Zecca runs the shop at Advantage, and tries to get his stable of over 100 athletes to save like they were 50 years old, not 20 or 30. Because their playing careers are so much shorter than the typical professional career, the investment horizon is much shorter, he said.
Most investors in the 20- to 40-year-old range would typically place more than 70 percent of their investments into stocks, but Zecca said he counsels his stars to put only 40 percent into equities.
"The key for us in managing money for professional athletes is not to create millionaires, but to keep them millionaires," he said.
Zecca, whose clients include Anna Kournikova and Sergei Fedorov, can be reached at 703-905-3300.
State Street Research & Management, Boston, MA. This unit of Metropolitan Life Insurance Co. is not a full fledged financial planner. It only does one thing, invest, so if you want help with a mortgage or insurance, this is not the place. But for athletes looking to invest, it could be a great place to go since in the nearly half year since former NHL star Derek Sanderson and John Gardner started the Athletes Fund, it has managed to out pace the market.
"If you are worried about your lifestyle when you retire, don't count on the government," Gardner warned. "Make sure you have assets when you retire. And that may mean you can't buy the next BMW."
State Street is now investing for over 50 athletes, both rookies and veterans. The firm counsels athletes on where and how much to invest, and Sanderson should know, as he went through the horrors of bankruptcy. You can reach Sanderson at (617) 357-1101.
CSI Capitol Management, San Francisco, CA. Leland Faust's outfit specializes in financial planning for athletes.
"Part of our goal is to get the client to save commensurate with what he is earning," Faust explained. "If you are making $10 million and save $1 million, that is terrible. If you are making $500,000, you should be able to save something. The saving percent goes up as the contract goes up."
CSI, like State Street, has established its own mutual fund, CSI Equity Fund. The fund has over $33 million , and was one of the top-rated funds this past year, Faust said.
There are many shady financial planners who target sports stars, so athletes should be cautious, Faust said. For example, planner John Gillette is serving a 10-year sentence for bilking athletes out of $11 million.
Faust an be reached at (415) 421-0535.
-Daniel Kaplan
Kaplan is a writer for Street & Smith's SportsBusiness Journal.
