Skyrocketing Salaries for Top Athletes Spark Gold Rush in Wealth Management
The unprecedented wealth being created by professional athletes has touched off a new gold rush among wealth management firms. With top athletes earning tens of millions of dollars in salaries and lucrative deals for college players, the population and wealth of pro athletes have made sports a key driver of growth in wealth management.
Wealth managers are expanding their sports and entertainment segments and hiring former athletes to recruit more clients. James Beale, a former hockey player, is now development director for Rockefeller Capital Management’s Rockefeller Global Family Office and oversees the Sports and Entertainment group. Beale said that while athletes aren’t all that different from other high net worth clients, having experience as a former athlete helps.
Athletes often spend most of their time on their business or career and don’t have much bandwidth for investing. They put 99% of their time into taking care of their body, managing their health and training, said Beale. Wealth managers come in as a trusted partner to help them manage their finances and give them back the time to focus on their craft.
However, advising pro athletes comes with unique challenges. Unlike most wealth creators, who create their wealth as they get older, athletes make their biggest windfalls at a young age. Handling millions as a 20-something year old or, increasingly, even a teenager, carries special risks.
Education is key to advising pro athletes. They are used to exuding confidence, so they’re often uncomfortable asking questions about investing. Wealth advisors must be open and willing to help them understand the complexities of investing, said Stacie Jacobsen, national director for client engagement and co-lead of the sports, media and entertainment group for Bernstein Private Wealth Management.
Pro athletes are also vulnerable to scams, frauds and bad investments. MLB phenom Shohei Ohtani discovered $16 million had vanished from his account. His interpreter later plead guilty to stealing from Ohtani’s accounts to cover gambling losses. A 2021 report from EY found that pro athletes lost nearly $600 million between 2004 and 2019 due to fraud.
Taxes are another big challenge for pro athletes. The so-called jock tax, where athletes often owe taxes to states where they play or earn income, can be complex and time-consuming to calculate. Wealth advisors work with athletes to keep detailed records and plan the best tax domicile.
Ultimately, being a wealth advisor to pro athletes is about preparing them for life after the game. Many careers are short and unpredictable, especially in the National Football League. Advisors say they have to be the biggest cheerleaders for their clients while they’re playing, but also plan for the inevitable. This includes everything from the investment plan to building a second career to negotiating long-term brand deals and income-generating assets.
“They realize this is likely their best shot at creating significant wealth,” said Jacobsen. “They’re taking it seriously, developing a professional team and starting to get involved and ask the right questions.”
