Lee Goggin, Co-Founder of findaWEALTHMANAGER.com, explains some key reasons why sports professionals must seek proper wealth management advice from a reputable firm. A number of grave risks await those who do not.
The recent arrest of a UK football star over a suspected million-pound tax fraud has highlighted yet again just how vulnerable sportspeople might be to inexpert – and even unscrupulous – financial advisers.
But sports stars have far more than possible tax disputes to be concerned about: the fact that their lives, and lifestyles, are so very different to those of mere mortals means that they have very specialised wealth management needs indeed. History is littered with examples of former top-flight professionals who have gone completely broke, and many more have found themselves in greatly reduced circumstances once the applause has stopped.
So, what is it that makes professional sportspeople such a special case, and why are they wealth managers focusing on them more and more as a distinct client segment?
Short, precarious careers
The first defining factor is that while they may earn significant (and often mind-boggling) sums, the careers of sportspeople are generally relatively short-lived. Possible exceptions like pro golfers aside, most athletes will retire in their thirties – if not well before. Some may be lucky enough to segue into second careers as coaches or commentators, but, for most individuals, the money they make in their good years must be invested in such a way that it can sustain a “retirement” of perhaps many decades.
While keeping a large proportion of your wealth in cash may feel “safe”, leaving money languishing at rock-bottom interest rates could actually be very risky indeed for your future financial health.
As we often warn our readers, the returns on your savings and investments have to at least keep pace with inflation to prevent the spending power of your wealth being eroded in real terms. Therefore, while keeping a large proportion of your wealth in cash may feel “safe”, leaving money languishing at rock-bottom interest rates could actually be very risky indeed for your future financial health. (This feature gives vital tips on how to protect your portfolio from inflation.)
It should also never be forgotten that the earning power of sports professionals is precarious and their fortunes can change in an instant. Lucrative sponsorship deals do not last forever, while the spectre of a career-ending injury is ever-present (and not something that can realistically be insured against).
All wise sportspeople will take great care of themselves in a bid to extend their careers as long as possible, but all should nonetheless have contingency plans in place in case their earnings should suddenly plummet. That said, sportspeople invariably put superhuman effort into rising to the top of their field and so should allow themselves to enjoy the fruits of their efforts while steering a sensible path.
All wise sportspeople will take great care of themselves in a bid to extend their careers as long as possible, but all should nonetheless have contingency plans in place in case their earnings should suddenly plummet.
Finding the right balance
Balance in all things financial is key, but sportspeople might find achieving the right mix of assets more difficult than most. Having worked very hard for years to get to the top, their earning power will often rocket. That, and mixing with other very wealthy individuals, might mean that sports stars are particularly prone to what is known as “lifestyle inflation” (or living up to one’s income).
Not only is there a risk that athletes spend as if their income will go on at its current level forever, they may also focus their wealth in just a few asset classes that may not hold their value. Very expensive tangible assets like luxury cars and watches can be an issue. A more prosaic example of concentration risk, however, is that is common for top footballers to plough many millions into sprawling estates close to their team’s ground, only to find these difficult to sell later due to muted appetite for super-prime property outside the capital.
Of course, achieving the right asset class mix – and then periodically revising it over the long term so it remains fit for purpose – is one of the trickiest parts of effectively managing one’s wealth. It is difficult enough for regular professionals or business people following a more predictable lifepath and will be far more challenging for sportspeople as each one really is a unique case.
Achieving the right asset class mix – and then periodically revising it over the long term so it remains fit for purpose – is one of the trickiest parts of effectively managing one’s wealth.
What is more, professional athletes are prone to being absolutely time-starved and constantly on the move. This, combined with the fact that they are likely to have dedicated themselves to their sport from a very young age, means it is highly unlikely that sportspeople will have the time or knowledge to attend to their financial affairs with the required level of focus. Maximising your investment returns and minimising your tax liabilities properly requires a very great deal of expertise. The financial services industry features a lot of jargon and ever-changing rules, and managing a portfolio of any significant size is a serious undertaking
All these factors conspire to make sportspeople vulnerable to taking poor financial advice from either incompetent or unscrupulous individuals. The fact that sports stars are easily identified and often have their earnings made public makes them a real target for those with nefarious intentions, leaving them wide open to hefty financial losses – or even the ignominy of investigation by the tax authorities.
The fact that sports stars are easily identified and often have their earnings made public makes them a real target for those with nefarious intentions, leaving them wide open to hefty financial losses – or even the ignominy of investigation by the tax authorities.
In contrast, reputable wealth management institutions can offer precisely tailored advice ensuring that a sportsperson’s wealth is maximised by all legitimate means, extending from investment management and tax mitigation right through to wealth structuring and estate planning. In fact, many of the organisations on the findaWEALTHMANAGER.com panel have made a real specialism of serving sports professionals and so will be able to bring a whole host of professional contacts and niche services to bear too.
Whether you are a sports professional or someone with more mainstream needs, we are sure to be able to introduce you to a perfectly matched firm.
If you would like to discuss your particular wealth management needs with the findaWEALTHMANAGER.com team, click HERE. Alternatively, click the banner below and find out which firm is right for you.