Financial literacy fundamentals help young athletes plan for their future
For many professional athletes, acquiring immense wealth immediately seems like the ultimate jackpot, but sometimes it’s a recipe for disaster, especially for young athletes, who are seeing the fruits of their labor pay off financially for the first time.
“There aren’t too many professions in the world where when you get a job, your salary is published and broadcast,” observes Alicia Jessop, associate professor at Pepperdine University and founder of Ruling Sports, an advice platform that exists at the intersection of sport, business and law. “Because of the visibility of revenue generated by athletes, they are a prime target for bad actors to come in and take advantage.”
Whether it’s scammers chasing riches or athletes themselves spending excessive amounts on depreciable assets, money problems usually come down to a lack of financial literacy. But this disturbing tale doesn’t have to be a reality for every recruit.
“The best thing all of us who work in this space can do is demand transparency,” adds Jessop.
The biggest win for these top athletes is investing in their own lives and ensuring that their hard work pays off far beyond the court or field. It is essential to ensure that they have the correct information and education. That’s why City National Bank has been a teammate for athletes since 1954, providing not only top-notch financial advice and services, but also personalized, hands-on coaching to help them navigate the complexities of the world of sport.
Mark Doman, a leading financial advisor to dozens of professional athletes, also believes his clients gain greater understanding through a hands-on approach. As CEO of The Doman Group, he asks all of his clients to come to his New York office during their respective off-seasons to work as interns. “They don’t pour me coffee or send me packages,” Doman says. “They come in and study their portfolios of stocks, stocks, income and bonds. Once you start showing these things to people, it becomes a lot less scary.
Even with increased knowledge of the financial world, a sense of invincibility can cause athletes to stray from the path of growth and stability. Receiving an overwhelming amount of praise, money, and attention can lead to feeling untouchable, and it can become a sticking point for Doman. Purchases like six-figure luxury vehicles and lavish jewelry are based on the common assumption among athletes that they will be competing for decades.
“The average career is three and a half years,” Doman says. “So I have to convince [my clients], you are not invincible. You may not have football in three years or basketball in six years. While life after sport may be a blur for today’s athlete, the CFO makes it clear that it will be a reality sooner rather than later and reiterates that planning is a crucial part of achieving financial literacy. Conversations about money management are tough, but talking to a recently drafted 22-year-old athlete about what he’ll be up to when it’s all over is even tougher.
Having personal conversations about finances and the future on a regular basis really has an impact. Doman thinks that’s also what makes City National Bank’s sports program so special. “Their strength is consistency. They are highly customizable regarding the needs of young people [talents], because let’s face it, their financials are a little different than a typical 25-year-old. They have been amazing at customizing strategies for athletes and performers to ensure they get the results they want.
Communication is the basis of understanding and advisors have a responsibility to respond to clients’ needs and concerns. Former college football player turned financial advisor Kevion Latham has been in many locker rooms, giving him the ability to offer financial wisdom and knowing when it’s time to sit down and listen. “Listen to them, be a sounding board for life’s problems that arise. Be someone who will listen to them and not judge them,” he says. “You have to talk to them and hold their hand and not make them feel uncomfortable because they don’t know what to do with the wealth.”
Latham’s sporting experiences give him insight into the impoverished backgrounds from which many of his former teammates and clients came. Creating a space of vulnerability through her ability to build relationships has allowed her to put clients on a much brighter path. “A lot of these guys are dealing with stuff,” he says. “They have parents who ask them for money and live off them, which shouldn’t be the case. We just try to be there for them through it all, try to be transparent and hold them accountable. Because it will end one day. Make sure that when it ends they will have something to show. Focusing not only on financial health, but also on the client’s overall well-being as a human being, is essential to winning off the court or field.
Christina Milano, founder and CEO of sports agency SEQUEL Sports & Entertainment, echoes this narrative: the well-being of her clients is her top priority, which is why she enjoys working alongside City National Bank.
“They’re very focused on how to develop the complete customer, not just their financial health,” says Milano. “I think that’s a big difference compared to a lot of banks. Many banks just want to make sure you are managing your money and are able to diversify your portfolio. All of these things are important. But they forget — or perhaps just don’t have the energy or the philosophy — to invest in the other aspects of the athlete, which [is] Human.”
This document is for discussion and informational purposes only and is not intended to provide specific tax advice. It is the policy of City National Bank not to provide tax, accounting, regulatory or legal advice. Rules in the areas of law, taxation and accounting are subject to change and open to various interpretations. Any strategies described herein were not intended to be used and cannot be used for the purpose of avoiding tax penalties that may be imposed. The Strategies were not written to support the promotion or marketing to another person of any transaction or subject matter discussed. You should consult with your other advisors about the tax, accounting and legal implications of any action you may take based on any strategy or information presented taking into account your particular circumstances.
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