Thought Leadership
Sponsored by Wealthfusion Limited
“Riches to riches”
By Aaruni Kumble @Wealthfusion
Professional athletes are known to have it all especially during the peak of their careers; However, as per a Bleachers Report, 2 out of 5 professional athletes are at risk of going bankrupt post their retirement.
Let us dive into our Guide and Investment Philosophies that help break the oscillation between "Riches and Rags”.
Aaruni Kumble
Credit: Wealthfusion Limited
Wealthfusion's Guide to "Long-Term" holistic professional success for Athletes:
The average weekly earnings of a Premier League player (under 23 years old) is approximately £60,000(Statista,2022) which for perspective can be compared to ONS' 2021 report of average annual wages in the UK at £38,131.
Professional sports is one of the few industries where individuals earn much of their money in the early stages of their career creating pressures on the players to wisely manage their fortune to last a lifetime. This is often an invisible burden players refuse to acknowledge and/or lack the tools of financial prudence. Therefore, we believe that there is a need for financial advisors’ intervention to help young sports professionals navigate their short careers and prepare for long retirements.
The future of aviation is strictly tied to several factors
Why is there a need for Financial Advice and Management for Sportspersons?
While pro-athletes are known to have lucrative contracts and a glitzy lifestyle, what is easily overlooked is their unpreparedness and inexperience in managing the sudden influx of wealth. There is no time to adapt to the dramatic changes in income.
Most of the athletes across various sports like football, basketball and baseball enter high paying contracts at a very young age where it is almost inconceivable and unreasonable to expect anyone that age to have a good set of financial skills.
Furthermore, a fact that is probably never fathomed by athletes is that their careers are shockingly brief as compared to a traditional professionals' 40-year career arc.
According to a study by Sports Illustrated, between 60-70% of football and basketball players go bankrupt within 2-5 years of retirement. Their average career ranges from the following:
- 5 years in Major League Baseball and National Basketball Association
- 7 years in National Football League
- 8 years for UEFA players
(Sources: Sports Illustrated and Bleachers Reports)
Considering these staggering statistics, we have outlined the following steps to financial success and independence for pro athletes:
1. Fiscal education and perspective:
One thing that all athletes have in common is determination and discipline to their game. It is essential as their financial advisors, to harness this aspect of their personality and explain to them the importance of savings, excessive spending and how treading down that chaotic path is not tenable for a lifetime.
2. Managing Cash Flows and Building Reserves for future portfolio Distribution:
One doesn’t have to be the highest paid player to be financially successful. The pillars of financial discipline for a sportsperson are ‘saving early' and 'Investment planning'. The two must move in tandem for a sustainable lifestyle and to create intergenerational wealth.
Source: First Equitable
The above illustration demonstrates how with no Investment Planning, savings of £20,000 per week from the age 20-35 at 0.5% earning deposit, runs out by the age of 55.
Alternatively, let us look at a scenario where both the aforementioned factors are practiced in parallel:
Source: First Equitable
The stark difference between the two illustrations can be seen whereby with effective investment planning and presumable estate planning, by the age of 85 the athlete has a pot of around £86 Mn.
3. Preparing for a second career:
It is important that sportspersons prepare for a second career for two reasons:
a) It provides a steady stream of income post retirement while also keeping them otherwise occupied
b) Additionally, it serves as a safety net for unforeseen circumstances in an athlete's life like prolonged injury, failure to perform, contract cancellations etc.,
This can also be seen through examples of notable sports professionals who are also now savvy investors and hold diversified portfolios like Alex Rodriguez, Shaquille O'Neal, Robbie Fowler.
4. Partnering with experienced sports financial advisors
Long term planning of finances is inextricably linked to decisions about career and lifestyle and many sportspeople have dealt with advisors who take a partial and short-term view. Young athletes generally have almost no experience of managing wealth, but it is vital that they become fully engaged in the process and have advisors who are able to walk them through the various decisions and implications. Also, sports professionals need advisors who are also sports experts and can understand the intricacies of the sport, the volatility of the profession etc.,
Fusionsports at Wealthfusion:
This is how we aim to achieve our goal to help athletes Own Their Wealth:
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Our team’s driving principle has been focussing on capital preservation while providing the range of family office services like Bespoke Investment & Financial Planning, Lifestyle Management, Wealth Management & Legacy Planning.
As a multi-family office, we have a specialised structure and team under ‘Fusion Sports’ where our in-house sports experts tailor solutions to each client’s financial structure. Our team is highly qualified in dealing with athletes owing to years of experience and personally understanding ‘what it takes’ to be successful off the field and sustainably so.
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For further information, you can contact us at:
E: sportsinfo@wealthfusion.co.uk
T: +44(0)2081547039
70 Baker Street,
London,
W1U 7DL
