Footballers’ wealth: Grass-roots financial planning

There are shocking levels of bankruptcy among ex-professional footballers. Here, senior executives at Smith & Williamson, the accountancy and investment management group, explain why they have been working to tackle the issue at grass-roots level.

Financial Planning
With the media hype over their stellar salaries, not to mention lucrative sponsorship deals, it would be easy to place professional footballers firmly in the “made for life” category. However, research* shows that an incredible two out of every five former professionals have declared bankruptcy within five years of hanging up their boots. It would be easy to blame these seemingly unlikely financial failings on other, well-publicised, excesses of the game. However, the financial reality of a footballing career is usually very far away from what the public – and the youngsters entering the profession – perceive to be the case, senior executives at Smith & Williamson explained in a recent interview.

Such is the need for professional footballers to have a financial reality check – and as early as possible – that the accountancy and investment management firm decided eighteen months ago to launch a pioneering educational programme to help set Premier League trainees on a sensible financial path.

To sum up the rationale behind the Smith & Williamson Academy programme, Nick Travis, investment manager at Smith & Williamson, said that rather than having to go and “clear up the mess” when footballers have taken poor (or no) financial advice, the firm decided “to go to the root of the problem” – namely, the historical lack of financial education in schools generally, but particularly in the academies dedicated to creating Premier League stars.

While there are certainly millions being made by professional footballers, the fact remains that playing at hallowed grounds such as “the Theatre of Dreams” can be as ephemeral as the nickname for Manchester United’s stadium implies.

Luke Brooks, a director in financial planning at Smith & Williamson, summed up the chances of any individual making it into the top flight of football: “Careers can be short, even if the upper echelons are reached. Many footballers fail to realise that a non-earning retirement (from the game at least) of potentially 50 years or more looms upon leaving the game.”

As such, there are a surprising number of examples of former Premier League superstars who have ended up in the bankruptcy courts; then there are the very much more common financial struggles among those in the lower echelons and, of course, those who never “made it” at all.

Financial responsibility

Brooks, along with Peter Fairchild, a partner in the private client tax team, and investment managers Nick Travis and Michael Saunders, have seen huge enthusiasm for the message of financial responsibility Smith & Williamson is bringing. In an effort to assist the younger footballing generation they devised their accredited National Vocational Qualification (NVQ) programme. The firm is now working with ten Premier League clubs and is having requests for its advisers to visit trainees as well as more established players coming in thick and fast.

There is, the group explained, often an acute need for proper financial advice at every level of the game. Saunders explained how often the financial services industry has been termed “short-termist”. “It is important to provide a long-term service to clients rather than selling a product to make a quick buck. Clients need to be treated as individuals and have bespoke financial solutions based on their needs. This is essential in sport where circumstances can change very quickly; one season you can be playing for the under 21s and the next be a fully-fledged first team squad member, which brings with it financial reward and responsibility.”

So, while the Smith & Williamson Academy programme is helping trainees in their teens and early twenties with the basics of savings and investments, the firm has long specialised in working with footballers and established sports men and women. It has been called in to assist at various stages of individuals’ careers – and often when things have gone badly awry.

Fairchild, a tax specialist, has seen the full range of financial mismanagement over his time working with footballers. At the more headline-grabbing end of the spectrum, he notes that some footballers (along with other sportspeople and celebrities) have fallen foul of HMRC by putting millions of pounds into dubious tax schemes and now face “accelerated repayments” of owed tax of a similar order of magnitude. At the other, more prosaic, end is a simple lack of financial planning and a belief that money will keep rolling in even after retirement.

I’ve been working with footballers for twenty years and when I first meet them it’s a surprise when they do have plans in place, said Fairchild. They need to have acknowledged that their earnings are going to fall off a cliff when they stop playing and that they are going to need to supplement that outgoing wage.

Their plans for after-retirement need to be realistic, noted Brooks. Although some former professionals have made a seamless transition to being television personalities, positions on the commentator’s couch are extremely limited. Further complicating matters is the fact that whilst professionals who keep playing until their mid-thirties are considered lucky, none are able to access their pension until 55. A special government dispensation allowing footballers to draw on pension savings at 35 was abolished in 2006.

Saunders pointed out: It is vital for sportsmen and women to obtain a holistic view of their financial affairs. Historically, some professionals have been ill-advised by existing associates, perhaps not fully experienced or qualified in the respective fields. We have found many sportspeople saving with the best of intentions, but due to poor advice it has been done badly. The unfortunate result is capital locked away for many years and an individual with an, understandably, wary view of financial advisers.

Footballers’ Wealth: A unique earnings trajectory

When the unique earnings pattern of footballers is taken into account, the troubles even those who reached the top of the game have experienced are not surprising – particularly when lifestyle factors are also considered. Because of the quantum of earnings involved, you wouldn’t think that someone could mismanage things to such an extent to which they become bankrupt, but some do, said Brooks. Often it’s about all the outgoings and having them lined up to their income. People come to find they have very large calls on their money that continue after their playing salary stops.

While some players in their thirties are willing to swallow their pride and make a slow glide down the divisions in a bid to keep earning as long as possible, this is only a short-term solution. Wages in the Premiership are light years away from those earned in the lower divisions. The figures you see in the press are outliers, said Brooks. In the Premier League, average weekly earnings are about £30,000 a week across the field, but in the Championship that often falls to £2-3,000.

It would be easy to think that this part of the story is all about fast cars and luxurious living. However, Travis is quick to point out that misguided generosity has also played a ruinous role. He highlights the case of ex-Aston Villa star Lee Hendrie, who was declared bankrupt in 2012. Anecdotal information suggests he bought a string of luxury homes for family members at the height of his career, as well as the top of the property market. He was subsequently left unable to cope with multiple hefty mortgages when he retired and the property market suddenly crashed.

Rounding out the picture are ill-advised business deals, risky investments gone sour and the familiar tabloid tales of gambling and substance addictions, wounding multiple marriages and even outright fraud. We perhaps wouldn’t normally think of these feted sportspeople as being in any way vulnerable, but their need for sound, independent financial, legal and business advice is clear.

That’s not to say that there have not been some very savvy footballers who have preserved and even built their wealth very successfully. Brooks cites the example of ex-Liverpool player Robbie Fowler who – despite having been in the game well before the astronomical Premier League wages of today kicked in – is still consistently a top 50 fixture in the worldwide “Rich List” of footballing figures and was estimated to be worth around £31m in 2012 as a result of the property empire he built up with his earnings.**

Other ex-professionals, meanwhile, have built up successful businesses or diversified investment portfolios which have kept them wealthy in a more understated manner. ”We try to teach all of our clients about the importance of diversification and picking the right investments to achieve their financial objectives,” Nick Travis explained. Players might think that emulating property tycoon Robbie Fowler is a good path, but they have to be reminded that his success was the result of perfect conditions in which to invest in bricks and mortar as well as adopting a highly strategic approach.

For young footballers learning about financial planning through the Smith & Williamson Academy programme, there are myriad examples of both ignominy and empire-building to learn from. However, it is bedding down general principles in the minds of trainees and the formation of good financial habits that is the over-arching aim of the programme.

Brooks explained, We try to explain the benefits of splitting their income in three. A third is for daily living expenses; a third is for more medium-term outgoings like mortgage payments or car loans; and a third is for what we might call a pension pot, but what in reality probably won’t be an actual pension but rather saving funds that can be accessed from their footballing retirement till their traditional retirement age.

Along with this, footballers are taught to think of their lives in terms of three phases, with their playing, earning phase of ten to fifteen years followed by 20 years of “pre-retirement” and then an actual retirement stretching from 55 on, continued Fairchild.

We teach them about investing over the long term and show them using graphs and illustrations why there’s nothing worse than pulling out at the bottom of the market, said Travis.  We often show them the Apple or Nike share price on their mobile phones to highlight the risks and rewards from investing. We know the importance of keeping the presentations relevant and interesting for the younger players so that they can connect with the content. If not, a lesson can be lost in translation, added Saunders.

We teach them not to put all their eggs in one basket and about buying the right asset class at the right time, said Travis. On this point, Fairchild noted that he often sees established players who have been diligently saving, but are unaware that the persistent low interest rate environment means they have actually in effect been losing money on some very large cash deposits.

Building from the basics

To this end, the financial education delivered by Travis and his colleagues teaches trainees about the basics of earning income from savings and how to invest tax-efficiently through simple products like ISAs, before then going on to cover the basics of how the markets work and how to be a disciplined investor.

This kind of introductory education is actually something the firm does with all its footballing clients, many of whom are earning five figures. Some organisations might come in and start showing them charts on price/earnings ratios, Travis continued. But, understandably for an individual devoted to football, that’s just not their world. You need to educate them first. Having started with groups of 20 trainees in a classroom setting, Smith & Williamson are now increasingly giving one-to-one mentoring with those further along the road to superstardom and are finding many enthusiastic learners.

In a similar manner to mainstream schools, forward-thinking football clubs are starting to recognise that education around financial planning and investment is a crucial addition to the syllabus. Hearteningly, the Smith & Williamson team is seeing training academies becoming increasingly vocal about their commitment to turning out individuals with good life skills – and therefore good life chances – whether they make it to the very top of the profession or not.

The academy project really reflects the culture at Smith & Williamson, maintains Saunders. We aim to build lasting relationships with the clubs who understand that we are trying to do what’s right for the players regardless of whether they become a fee-paying client. We want to build trust; trust with the academies and trust in the potential client, in the knowledge that we’re working in their best interests.

Those on the cusp of football superstardom doubtlessly stand in a very enviable position. However, the unique trajectory of even the most talented footballer’s career could mean that they really do need to have one eye on the end of their professional playing days. That message may seem to run contrary to the enduring adulation and affluence most would associate with “the beautiful game”. It is, however, an eminently realistic one in a world where becoming extremely wealthy through professional football is rare, and remaining extremely wealthy is rarer still.

*In a 2013 study by XPRO, a charity for ex-professional footballers

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