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TL;DR: Athletes face unique financial challenges and opportunities, making specialized financial advice crucial. Here’s why:
- Personalized Financial Planning: Essential due to the unpredictable and short nature of athletic careers.
- Long-term Investment Management: Helps manage and grow wealth during and after short peak earning periods.
- Coordination with Other Professionals: Ensures unified strategies with accountants, lawyers, and agents.
- Informed Tax Planning: Navigates complex tax scenarios to optimize financial benefits.
- Educated Decision Making: Builds financial literacy to empower athletes in handling sudden wealth.
- Dedicated Risk Management: Protects against risky investments and financial scams.
- Charitable Giving & Legacy Planning: Guides impactful charitable contributions and secures future family wealth.
When professional athletes reach the pinnacle of their sports, they often acquire substantial amounts of money within a relatively short time frame. Those who excel in their fields face distinct financial challenges and opportunities.
That's why they can greatly benefit from the guidance of a financial advisor for athletes, who can provide specialized assistance to help them navigate their unique circumstances.
Professional Athletes Financial Advisor/Planning 101
The salary for a professional athlete can vary. While the median pay for athletes and sports competitors is $70,280 per year, this number can be much higher. For instance, professional athletes can make millions of dollars a year.
With more money comes more risk. Considering the other unique factors of an athlete’s career, having a financial advisor is crucial to ensure long-term financial stability.
How Much Does a Financial Advisor for Athletes Cost?
A financial advisor for athletes’ salary can vary based on experience and clientele. However, keep in mind you get what you pay for.
A pro athlete financial advisor is an investment in your success. The expertise they bring to the table can help you make the most from your career earnings. Along with personalized financial planning, a financial advisor for athletes provides priceless peace of mind that someone is looking after your best interests.
Here are some of the other reasons to consider hiring a financial advisor for athletes:
1. Personalized Financial Planning
Professional athletes need to understand the importance of having a financial advisor. Given their careers' unpredictable and short-lived nature, they need a solid plan for long-term financial stability. In 2021, the National Collegiate Athletic Association (NCAA) allowed student-athletes to earn income from brand deals.
Financial planning for athletes can take into account potential early retirement due to injuries or unexpected circumstances. Similarly, a financial advisor for athletes is equipped to handle complex financial issues such as contracts, endorsements, investments, and tax implications across different states or even countries.
Working with a financial advisor for professional athletes can secure your future even in uncertain circumstances. A fiduciary should be working with your unique financial situation and goals.
2. Long-term Investment Management
Financial guidance is essential for athletes looking to grow their wealth. By receiving advice on prudent investments, diversifying portfolios, and managing risks, athletes can maximize their financial potential and secure a prosperous future.
Athletic careers can be much shorter than traditional careers, often lasting only a few years at peak earning capacity. This makes it crucial to have a strategic financial plan in place for when their main source of income stops.
Financial planning for professional athletes prepares them for post-retirement careers and retirement planning. Advisors are a valuable resource in this process as they can provide guidance on various options, such as investing in businesses or pursuing broadcasting opportunities.
They help athletes take charge of their investments by overseeing portfolios, carefully selecting suitable investment vehicles, and consistently reviewing and adjusting them based on performance and changing needs.
3. Coordination with Other Professionals
Wealth management and financial advice should come from a single voice. Financial advisors for pro athletes must work closely with accountants, lawyers, and agents to ensure that all aspects of an athlete's financial life are in sync.
Advisors need expert legal advice when it comes to endorsements and contracts. Athletes need a comprehensive approach to provide valuable guidance to ensure that these opportunities are financially beneficial and align with the athlete's goals.
4. Informed Tax Planning
Athletes, given their potential for substantial incomes and bonuses, often encounter intricate tax circumstances, mainly when they earn money in multiple states or countries. With the guidance of a financial advisor for athletes, they can effectively optimize their tax strategies and maximize their financial benefits.
As high income-earning individuals, athletes are subjected to higher taxes and won't be able to qualify for certain benefits. You might want a financial advisor for athletes to structure investment portfolios that minimize taxes. Numerous tax strategies exist, but athletes need to know what will work best for them.
These include tax-loss harvesting, investing in funds that are designed to be tax-efficient, and holding onto investments for longer durations to qualify for lower long-term capital gains rates.
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5. Educated Decision Making
Athletes may not have experience with budgeting or long-term financial planning. Especially when they receive a major contract and pay raise seemingly overnight. Having access to significantly more income can be overwhelming at first.
Financial education is critical to establishing healthy spending habits. Budgeting and tax plans from a financial advisor only work if athletes understand their finances. Athletes need a financial advisor who can provide essential guidance and help them comprehend their personal finances to make well-informed and empowered decisions.
It’s also important to note that professional athletes are often targeted by scammers, which is regrettable. ESPN recently reported that professional athletes lost nearly $600 million due to fraud from 2004 through 2019. There is a clear correlation between rising athlete salaries and income from endorsements and these targeted financial scams.
Having a reliable financial advisor can be a strong defense against fraud. They act as gatekeepers, rigorously assessing investment opportunities and safeguarding your assets.
6. Dedicated Risk Management
With high incomes, athletes become targets for risky investment opportunities as well.
To ensure an athlete's wealth and future earning potential are safeguarded, they need to be supported by comprehensive risk management. Financial advisors for athletes help them take control of debts with practical strategies for managing and reducing them, covering everything from mortgages to credit card balances.
They ensure regular reviews are conducted to discuss performance, goals, and changes in the athlete's financial or personal situation. Cash flow is the difference between your income and expenses. A solid risk management strategy will help athletes avoid costly mistakes in determining the amount that can be allocated toward investments. They need consistent positive cash flow and plan for its sustainability in the future.
7. Charitable Giving & Legacy Planning
Athletes may have a strong desire to contribute to their communities. By seeking guidance from a financial advisor, athletes can ensure that their charitable giving has the most significant possible impact and enjoy tax benefits. There are various options like donor-advised funds, which can offer an immediate tax deduction. Proper financial planning for athletes will help you make the best decision to give back sensibly.
Similarly, pro-athlete financial advisors are always looking ahead to the future. Financial advisors assist in planning for the future of an athlete’s family, ensuring that their wealth supports not just themselves but also future generations. Estate planning can also help ensure an athlete’s money is distributed to charities or desired beneficiaries after they are gone.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
