How to Avoid Common Financial Mistakes Many Pro Athletes Make
We recently sat down with Morgan Stanley Financial Advisors Vince Fiori and Mark Bradburn. Their team focuses on working with baseball players to help them achieve their financial goals. After spending time with them and receiving feedback from some of our members who work with them, we now understand many of the common financial mistakes they help professional athletes avoid.
Why do so many athletes “go broke?”
The athletes that don’t prioritize the financial decisions of today are potentially putting their financial future at risk. The choices and habits that are developed early on will have long term implications on the success or failure of their financial livelihood.
According to a Sports Illustrated study in 2018, 60% of NBA players go broke within five years of departing the league and 78% of former NFL players file for bankruptcy within 2 years of leaving the league. The average MLB player goes bankrupt 4x the national average yet the average MLB player earns just shy of $25 million in career earnings.
Most athletes who go broke don’t have a real plan. All of our clients understand how much money they spend annually, and how much they are saving each year.
An athlete differs from a non-athlete in many ways. An athlete has had a very successful career if they retire in their 30’s. A non-athlete may not retire until they are in their 60’s. So, the time spent in retirement for an athlete might be 50-60 years vs a non-athlete spending 20-30 years in retirement.
It is critical to have a financial plan for an athlete. The athlete and their spouse MUST buy into this plan. At some point, the salary stops and the bills continue—there must be a strategy in place beforehand to maintain the lifestyle and secure the athlete’s retirement after a successful baseball career. We make the comparison to a “game plan” all the time. Athletes relate to a game plan. They understand that they don’t walk into a game not knowing the opponents they will be playing. They know who hits a fastball well, or a pitcher’s “go to” pitch, etc. They need that similar mindset and strategy for retirement.
What are some proactive steps to help prevent financial challenges later in life?
It is important to spend time on developing that financial playbook. The more time people spend focusing on understanding spending habits, the more people realize how quickly money can be spent. We comment frequently to our clients on their dedication to their craft (working out, focusing on hitting or pitching, eating right, etc). Why don’t they spend a few hours focusing on their financial health? Why not make sure all of the hard work results in a lifetime of financial success for them and their family? Both husband and wife should have some level of engagement in the financial discussion.
We believe it’s critical for an athlete and their family to build the best team now. Don’t wait for a big contract to be signed. Start working with the right advisors now and be ready for your financial success.
Can you expand on what you call a “Financial Playbook?”
It is a term that we use when discussing a financial plan for athletes. When you have a game at 7pm, how do you prepare for that game? Do you wake up, roll out of bed at 6:00pm get to the stadium at 6:45pm and step into the batters box for first pitch at 7:05pm? NO! Most likely you have shown up at 1pm, took reps off the tee, gotten a solid meal in, went out to the field, fielded a hundred ground balls, pop fly’s, back hands, double play balls, then made your way into the cage to get your second round of BP in before your 3-4 at bats that night. You do this to train yourself so that you are ready for the “moment.” It’s why you spend so much time in Spring Training—to be prepared for real game situations.
We travel to Florida and Arizona each year to see clients and prospective clients and often hear about practice. Players share stories with us of how they pitch out of the stretch when no runners are on base, just so they are ready for that situation when it happens in a game. Your finances should be treated with the same dedication. Do you have a plan, a routine, or playbook for your retirement? It’s critical to plan for your financial future now.
What are some items in a “Financial Playbook?”
We plan for everything in this playbook. Financial stability, a second home, sports cars, children’s education, or even financial help for a family member. Really anything can be added to this financial playbook. Each client has different concerns or financial needs—there is no “one size fits all.” Everyone is different and each Financial Playbook is customized to the client including life insurance and identity theft protection.
High profile and low profile athletes have private information available for the public to see. It’s important that we protect someone’s identity so no one can access this private information. These are not concepts that most financial advisors get involved with. We believe it’s necessary to be involved in every area of our client’s lives financially in order to provide the best service and protection for the athlete and their family.
Due to Covid-19 the world has seemed to stop, what is your advice to the athlete community during this time?
Use it to your advantage. Turn a negative into a positive. Use this as a time to engage with their advisor. Since the stock market is very volatile; it’s the right time to be discussing your financial future. This is a perfect opportunity to get your finances organized and in order. Determine whether the investments that you own match up with the goals and objectives that you have in your future. You might have a loss of income for the season. Learn how that impacts your financial playbook. We are constantly asked to review and give our advice on an investment portfolio. Sometimes when we complete this review it’s an “eye opening” experience for the prospective client.
What should I look for when selecting a financial team and what questions should I ask?
Many advisors want a high profile client. You need to make sure your advisor understands athletes. Would you have a friend or your agent’s roommate perform your Tommy John surgery? Most likely, the answer is no. You would probably go to the best doctor in the world that specializes in Tommy John surgery. We believe the same logic should be applied for an athlete choosing a financial advisor. You should choose an advisor that specializes in helping athletes manage their money.
If we were looking for an advisor for ourselves, we would be asking a lot of questions:
How much experience do you have in working with other athletes?
How many years have you been practicing?
How large is your team/company?
Why should we pick you?
What is the cost? The full cost!
Do you only handle investments or can you handle other areas of our life financially?
These are just a few questions we would start with. Trust is an important factor that you won’t achieve just asking a few questions. You either believe in your gut that someone is a trusted advisor or they aren’t. Ask a few teammates about their investment team. Can they explain why they like their investment people? This will show you the depth of the relationship they actually have. Use this fabulous organization (Our Baseball Life), they are a resource guide. They are vetting experts for you.
Also, make sure the advisor is willing to spend the time to educate you. We believe it’s very important for an athlete and their family to understand everything they own and what they are investing in. It is your financial future. Remember you wouldn’t let another person throw a pitch for you, or step into the batter’s box for you, so why would you let someone else control your financial future?
Vince J. Fiori
Financial Advisor
Morgan Stanley Wealth Management
522 5th Ave, 11th Floor
New York, NY 10036
201-921-6922 cell
212-603-6181 office
Mark Bradburn, CRPC
Managing Director
Sports and Entertainment Director
Private Wealth Advisor
Morgan Stanley Private Wealth Management
522 5th Avenue, 11th Floor
New York, NY 10036
Tel 212 230 3578
Mark.Bradburn@MorganStanleyPWM.com
NMLS # 1253177
The views expressed herein are those of the author and do not necessarily reflect the views of Morgan Stanley Wealth Management or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
Morgan Stanley Smith Barney LLC. Member SIPC.
CRC 3099761 and 05/26/2020
