What Separates a Pro Athlete From His Money?

Bad advice, yes. Fraud, sometimes. But it takes two to tango your way to financial ruin

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When Michael Vick declared bankruptcy, it raised our eyebrows. Sure, we knew his legal defense against dogfighting charges would have cost a lot of money, but not THAT much money. He, like a host of other visible athletes, made bad investments and hired a fraudulent money manager. His new $100 million contract from the Eagles will help, but it’s also entirely possible that his financial implosion could happen all over again.

According to a often-cited article in Sports Illustrated, a whopping 78% of NFL players will declare bankruptcy or face joblessness and divorce a mere two years after they finish their career. NBA players face a similar fate at a 60% rate within five years of retirement. Former NFL star Chris McAlister, who signed a $55 million contract in 2004, is just the latest in a long list of pro athletes who have gone broke.

Clearly, the numbers don’t add up for these one percent-ers (if I adapt the Occupy Wall Street lingo.) On the face of it, this makes no sense. Top shelf professional athletes make millions in a concentrated period of time. When markets crash, they have enough earning power to wait it out. Even when that earning power of your playing days are over, your stash should keep you from liquidating anything at an inconvenient time. In theory.

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I knew the moment the ink had dried on my first professional contract, I would be hearing from financial planners. Thankfully, my parents had already taught me some rudimentary investing and were so committed to my learning the nuances that when I was in elementary school, my father had me keep a daily price log for Oppenheimer Funds. I was fortunate enough to have worked with fantastic brokers for the past twenty years, but that is rarely the story. And even so, I wasn’t exempt from a few post-career financial nightmares.

Over the course of many seasons, I received a ton of fan mail, but I could equally depend on mail that contained offers from investment firms and their team. It was rarely a personal letter, it was usually sent to everyone on the team. We were vulnerable, because we were also gamblers. Odds mean nothing to someone who has reached the highest point of a professional pyramid so steep that sherpas put up the white flag. If an investment professional approached with the right angle, the right name to drop and a lot of persistence, we would listen. It was often a community ripple effect. One guy does good work by a teammate and the rest may follow.

The vulnerability also comes from the speed in which the money comes in. One day, I was making $850 a month before taxes, four years later I was making ten times that, four years later I was making ten times that. When it comes in that quickly, it also tends to go out quickly, especially if you don’t have some competent help.

Since I did a ton of work with the players association for baseball, I started paying a lot more attention to the wealth management groups looking to represent players’ financial interests. I found that there were many good-hearted people who genuinely liked pro athletes, liked their circles, but I also found it hard to navigate. Was Merrill Lynch really doing something magically different than Morgan Stanley? Does this one guy blowing up my voicemail really have more insight into the markets than another? Was this business proposal presented to me by a friend of a friend’s third cousin, sound? (Keep in mind, everyone and their dog comes to you with a “can’t miss” business proposal.) Most players in the thick of their career barely have time to look at a bank statement, let alone sift through book-length prospectuses.

Then comes the critical moment when no one wants your athletic services any more. It is when an athlete is most susceptible to poor decision-making, since money is a great distraction from the emptiness of a career abruptly ending. One time-filler that seems to make the most sense is to have your own business. You can have the autonomy, you can put your name on the scoreboard again, and you can run from plenty, like a melting marriage or a PTA meeting. At this moment, a lot of bad decisions are not only possible but guaranteed.

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It is not just athletes who have a hard time transitioning from one field to another. Ballet dancers, physicians leaving a practice, teachers bounced from a school system shake-up. The temptation is to look for relief first and a solid plan later, and unfortunately your money can start to be your anesthetic to buy your way out of the pain.

So to those planners with any athlete’s financial or estate plan in the works, I hope it comes along with a life plan, a psychological, marital, and personal plan for how you would get his or her mojo back. Help your client re-capture the mid-career swagger at a time when he or she was feeling some harmony at home. A huge challenge, but without those parts working together, money is just another fast-acting poison.