The Tampa Bay Buccaneers’s Tom Brady led his team to a Super Bowl thrashing of the Kansas City Chiefs Sunday night, cementing his reputation as one of the sport’s greatest stars. Certainly, Brady has been paid like he is: He has signed contracts worth more than $263 million during his career—not including lucrative endorsement deals with Tag Heuer, Aston Martin, Under Armour and other prominent brands.

Outsize numbers like this sometimes makes it seem like many professional athletes are set for life financially. No surprise, the reality is quite different.

The average NFL career lasts just over three seasons. What’s more, those who do get big money generally have to wait until after rookie contracts expire.

For every Tom Brady, there have been tens of thousands of professional athletes who enjoy relatively large incomes for a few years but are retired from playing before they hit 25. For many young athletes, coming to terms with this reality before they stop playing is one of the biggest obstacles between them and achieving long-term financial success.

The fact that nearly every player is lionized from a young age, growing up with family, friends, coaches, media, agents, and everyone in between showering them with praise, makes it a bigger challenge than it sounds. Many never fully realize until it’s too late that they won’t sign an eight- or nine-figure contract.

Outside of setting expectations, here are a few more recommended strategies for serving professional athletes:

Strategic income planning.While every active player is nominally rich (the median NFL salary is over $800,000), their earning windows are frighteningly small, with most being one tackle away from a career-altering injury. Indeed, unlike other high-earners, most professional athletes need to fund a significant amount of future spending with their current salary.

This underscores the need to provide players and their families financial education and counseling. Advisors should clearly emphasize how careful planning and investing could give them the opportunity to sustain themselves in the future, decades after they’ve stopped playing. By modeling returns over time, advisors can show how those potential gains can boost the long-term value of a player’s portfolio, which can later be leveraged to produce income streams down the road.

Also, be sure to first address players’ future financial needs and must-haves over nice-to-haves. An advisor can always adjust the plan if a player signs a new, bigger deal, or receives additional income from another source.

Taxes and investments.Seek to balance their investment portfolio with a mix of growth and income, always being mindful of tax-aware strategies to defer and limit realized gains until their high-wage playing careers are over. Not only will their income needs be more acute at that point, but their tax burden will almost certainly be lower as well.
While there are a few routes to accomplish this, one possible solution is a charitable remainder trust. A player could fund one with a lump sum and then immediately take the income deduction (when they are high earners) while structuring it to pay an annuity stream in future years. The remainder is then donated to charity.

Another significant factor is that all professional athletes pay taxes where they play, including road games.

For instance, if a client plays for the Los Angeles Rams, their paychecks will be taxed based on California tax laws, as well as on those of the states where they play their away games. Still, it does make sense for them to live, if possible, in states with low or even zero rates because that could have favorable tax and trust implications later on.

Being the bad guy. One of the rewards of being a professional athlete is giving back to family and friends. That prospect is also one of the challenges because most cannot afford to support their extended families, nor invest in every business idea presented to them.
That’s why the advisor must be willing to wear a black hat. When a player must fend off continual requests for money from their inner circle, it often weighs on them emotionally. In these instances, it’s helpful for a player to be able to say, “Sorry, my financial advisor says no.”

Of course, it’s always possible that an attractive private investment opportunity will present itself. In those instances, an advisor should do what they can to shield the player from liability by, for example, advising them to be a limited partner in the venture.

Time and team. Understand the time constraints on athletes. Yes, there’s an offseason, but they could be largely inaccessible from the moment training camps open to the end of the season. This puts an onus on the advisor to build close relationships with agents, personal attorneys, CPAs, and others who guide them with their financial and legal matters.

Unfortunately, numerous instances exist in which players have been burned by advisors. While every investor needs thoughtful, dispassionate, and professional advice from a well-vetted financial advisor, it’s hard to think of a group of individuals who could use it more than professional athletes, due to their unique set of needs.

By Andrew Graham

Andrew Graham is the founder and managing partner of Jackson Square Capital, a San Francisco-based wealth advisory and asset management firm. He is also a NFL Players Association Registered Player Financial Advisor.

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