Winning Off the Field: The Pro Athletes’ Guide to Wealth Management

Winning Off the Field: The Pro Athletes’ Guide to Wealth Management

Picture this: The final whistle blows, the crowd cheers, and another victory is recorded in the books. Yet, beyond the floodlights and roaring fans, as a professional athlete, you grapple with a challenge that doesn’t come with a playbook: managing the sudden wealth you have accumulated during your playing years

While the glitz and glamour of sports make headlines, there’s also a less talked-about narrative — the financial pressures of making sudden wealth last a lifetime. 

For many athletes, the ascent to professional status often coincides with a meteoric rise in their financial earnings, which could be a million dollars per year or $50 million. One source of pressure is the amazingly short duration of many pro careers – not everyone has the longevity of Lebron James. Careers can even be shorter if the athlete suffers a catastrophic injury. 

Before you know it, the jerseys are hung up, and the adrenaline-fueled games become cherished memories. 

There are a lot of major financial decisions that must be made early in your career. Whatever decisions you make in this brief window can drastically shape your future.

A good example is in the 1980s when Kareem Abdul-Jabbar trusted his financial future to a business manager. As it turned out, some of his investments were either poorly chosen or downright fraudulent. Among the most infamous of these bad investments was a failed shopping center development in Canada. Abdul-Jabbar reportedly lost millions of dollars due to these mismanagements.

The financial loss served as a significant wake-up call for the basketball great, and he later became much more involved and educated about his finances. This experience also became a cautionary tale for other athletes about the importance of being knowledgeable and vigilant about their financial affairs. A short career followed by 50 or 60 years living off those assets is a relatively unique phenomenon. 

The Unique Financial Life of a Professional Athlete

Here’s a statistic that may shock you. Roughly 80% of NFL players face bankruptcy within just three years after hanging up their cleats, as reported by Sports Illustrated. 

Some common financial missteps that can happen to professional athletes:

  1. One of the most frequent mistakes is overspending. The allure of lavish lifestyles, bolstered by a culture emphasizing luxury, can lead many athletes to future financial instability. It’s easy to justify that luxury car or extravagant vacation when the checks are rolling in, but what happens when game day no longer includes you?
  2. Due to the sheer amount of your earnings, you may become a magnet for bad investment schemes. Unscrupulous people may try to promote the “next big thing” to you.  Distinguishing a genuine opportunity from a swindle requires experienced, objective judgment.
  3. There’s pressure from your inner circle. Entourages, friends, and even lesser-known family members can sometimes view you as a source of financial support or handouts. This emotional and financial tug-of-war can strain relationships and deplete your savings.
  4. Last but certainly not least is tax planning, a form of financial erosion (which can deplete your assets). The impact of taxes should be incorporated into all of your financial decisions. Earnings in multiple states or countries create complexities that require specialized knowledge to avoid excess taxes and potential penalties.

As a professional athlete, the path to financial security requires more than just skill on the field; it demands discipline and a well-thought-out financial strategy.

ILG Insights: Don’t try to manage sudden wealth yourself.  Hire a fiduciary financial professional with extensive experience working with other athletes and affluent individuals to help them manage their wealth.  A fiduciary financial advisor’s primary responsibility is to always act in their client’s best interests, providing personalized financial guidance, investment management, and other advice while avoiding potential conflicts of interest.

Building Your Team of Financial Professionals Off the Field: Finding the Right Wealth Manager 

One of the first things you should do before you sign your first contract is to select a competent wealth management team. This is tougher than it may sound when all wealth management teams claim to be competent. You only have one sports career, so making the right selection is crucial for a successful financial future that may have to last a lifetime.  

Every team needs a quarterback, and your wealth manager is ideal.  Your quarterback can assemble a team of professionals who provide planning, investment, tax, and risk management advice and services. You benefit when you avoid duplicate or conflicting advice from a team of professionals with no quarterback There is also a second major benefit – you minimize your risk of duplicate fees.

One of the most important financial decisions you will ever make is selecting the right team of professionals.

When talking with potential wealth management firms, ask objective questions to help you understand their qualifications and experience working with pro athletes. 

You should also check the compliance background of any advisor you are considering to see if they have any complaints or disclosures. This can be done through FINRA or the SEC.  If a potential advisor has disclosures, ask for documentation because this could be a major red flag. 

Setting Clear Financial Goals: Beyond the Salary

You may think, “I’ll never be able to make this much money again,” which may not be true based on endorsements or how you invested your income during your playing years.  As a pro athlete, having a solid financial team and strategy in place is crucial before you retire. 

Taking a measured, proactive approach to wealth management is an absolute necessity and should be put in place as early as possible in your playing years. Then you are prepared no matter how long your career lasts. 

Your financial plan should start by setting clear financial goals and objectives.  Your goals should be SMART: Specific, Measurable, Achievable, Relevant, and Timely

Asset Protection Planning-The Core Foundation of Sports Wealth Management

In football, a team’s quarterback is like an on-field general, and your offense’s job is protecting the quarterback in the pocket with all of their size and skills – they are the moat that protects the quarterback.  In our wealth management service, this is what we call the Asset Protection Planning process.  

At ILG Private Wealth, our Castle-and-Moat Wealth System™ isn’t just a basic, one-size-fits-all wealth management process.  It’s our signature approach to ensuring, as a professional athlete, that your wealth is safeguarded for you and your family well into the future. 

We believe that these wealth management services are necessary to protect and nurture your wealth.

Tax Avoidance Strategies: Navigating the maze of taxation can be daunting. We partner with you to craft a tailored tax strategy, ensuring you only pay what’s due so you keep more of your hard-earned money for your future use. It’s not just about paying taxes but minimizing unnecessary taxes due to poor planning.

Tax avoidance is illegal. Tax minimization is legal and should be part of your financial planning strategy.

This will include a thorough assessment of your sources of income and how you invest assets for growth, income that minimizes your tax liability. You should have a diversified strategy that includes taxable, tax-free, and tax-deferred investments.  Where and when you start taking distributions is also an important wealth management strategy. 

Strategically Aligned Investment Planning: Managing your investments isn’t just about chasing rates of return; it’s about being smart, risk-averse, and strategic. By looking at all of your investments, we can craft strategies that minimize risk while producing competitive rates of return. At the top of your risk management list is diversification which helps you pursue goals and minimize risk simultaneously.

Estate and Legacy Planning: Crafting your estate and building a legacy for current and future generations is more than just penning a will or setting up a trust. It’s about devising a holistic plan that embodies all of your aspirations and beliefs. It ensures that your family and wealth remain shielded from unforeseen circumstances and potential threats. It’s personal, it’s proactive, and it’s about preserving what matters most to you.

Risk Mitigation and Shifting Strategies: The ILG Castle and Moat Wealth System™ doesn’t just take a superficial look at your finances; we take a deep dive that assesses potential risks and develops tailored strategies that avoid these risks or minimize their impact.  This could include certain risks that can be catastrophic in scope: Premature disability or death, long-term care, and other types of insurance services that protect your financial interests. 

Optimized Philanthropic Strategies: Philanthropy, undoubtedly, brings its own rewards. But with the ILG Castle and Moat Wealth System™, the benefits extend far beyond gifting money, including appreciated assets.  Effective philanthropic planning allows you to support the causes closest to your heart and offers strategies to minimize income and estate taxes when you provide this support. Imagine redirecting what would have gone to the IRS to one of your most cherished nonprofits: a university, church, medical research, or some other worthy cause.  

At the same time, you could be benefiting yourself and your family creating a win-win-win situation for everyone.

Leverage Your Financial Success

At ILG Private Wealth, we’re committed to helping you harness the true potential of your wealth. Let’s shape a strategy tailored just for you, ensuring your finances will thrive for decades to come. Every financial journey is distinct, and so should the financial solutions that drive it. Connect with us today.

How to leverage real-world financial planning

John Iannucci, J.D., LLM

More about the author: John Iannucci, J.D., LLM

An experienced tax, business succession, and estate planning attorney, John was the director of the estate, retirement, and business planning departments of several law firms in Florida and Pennsylvania before forming ILG Private Wealth. John is passionate about protecting, growing, and successfully transitioning his clients’ wealth.

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