Juan Soto of the New York Yankees during the bottom of the 6th inning of a game against the Seattle Mariners on May 22, 2024, at Yankee Stadium in the Bronx, New York City.
Sarah Steer | Getty Images Sports | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter by Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up to receive future editions directly to your inbox.
Rising salaries for top athletes and big deals for college players are sparking a new gold rush among asset management companies.
Juan Soto’s $765 million contract with Major League Baseball’s New York Mets highlights the unprecedented wealth generated by professional athletes and the opportunities for asset management firms that handle their investments. With college athletes earning six- and seven-figure incomes for their name, image, and recognition, women’s sports on the rise, and the population and wealth of professional athletes, sports are becoming a major driver of wealth management growth. It has become.
“The numbers are through the roof,” said Molly Cloud, a financial advisor and director of sports and entertainment at Morgan Stanley. “There is more money out there than there was 10 years ago, and being part of that growth makes our job more complex and exciting.”
From long-time leaders in fields such as morgan stanleyBernstein, UBS and goldman sachsmultifamily offices including Rockefeller Capital Management, and even private equity firms, wealth managers are expanding their sports and entertainment sectors and hiring former athletes to attract more clients. There is.
Former hockey player James Beal currently serves as director of development for Rockefeller Capital Management’s Rockefeller Global Family Office, where he oversees the Sports & Entertainment Group. Beal said athletes are not that different from other high-net-worth clients, but his experience as a former athlete is helpful.
“I’ve seen a lot of friends in the field[of sports]who probably didn’t spend enough time being conscious about their wealth, and that put them in difficult situations. So, Understanding that and trying to help people avoid those problems early in life.”Because of their career, I have a good place in the overall network of athletes.”Beer said.
Beal said athletes, like other high-net-worth clients, spend a lot of their time on their businesses and careers, leaving them with less money to invest.
“They spend 99% of their time taking care of their bodies, taking care of their health and training,” Beer said. “This is very similar to entrepreneurs here who are always focused on their business. As a trusted partner, we help them manage their finances and give them back their time to focus on their work. ”
But other advisers to wealthy athletes say they have unique challenges. Unlike most wealth creators who accumulate wealth as they age, athletes accumulate their greatest wealth when they are young. Handling millions of dollars in your 20s, or increasingly teenagers, comes with special risks.
“At a young age, they’re not going to be doing this for the rest of their lives,” said Stacey Jacobsen, national director of client engagement and co-leader of the sports, media and entertainment group at Bernstein Private Wealth Management. “I’m making more money than I ever did before.” “Their relationship with money is almost unique from most of the other people we work with.”
Education is key when advising professional athletes, given their relatively young age. Jacobsen said athletes often feel uncomfortable asking questions about investing because they are used to exuding confidence.
“There’s a sense of, ‘Oh, I get this,'” she says. “Behind the scenes, they’re not really like that. So I’m going to have to be open and say, ‘Do you have any other questions about these areas?'” or “About that. Is there anything you would like to dig deeper into?”
Because professional athletes are older and overly focused on their careers, they are easy prey for fraud, fraud, and bad investments. MLB genius Shohei Ohtani discovered that $16 million had disappeared from his bank account. His interpreter later pleaded guilty to stealing from Ohtani’s account to cover gambling losses.
Professional athletes lost nearly $600 million to fraud between 2004 and 2019, according to EY’s 2021 report.
Taxes are also a big issue for professional athletes. The so-called jock tax, which often requires athletes to pay taxes to the states where they play or earn money, can be complex and time-consuming to calculate. Wealth advisers said they are working with athletes to keep detailed records and plan optimal tax addresses.
Advisers say their biggest job working with professional athletes is helping them say “no.” Young athletes are vulnerable to expensive decisions, whether it’s an investment pitch from a friend or family member or an impulse purchase of a $400,000 Lambo or an $800,000 Richard Mille watch.
“If one of my customers came to me and said, ‘I want to buy this car,’ and it wasn’t in the original financial plan, I would say, ‘Not yet,'” Jacobsen said. spoke. “Or you might say, ‘Okay, but here’s how that purchase will affect your financial plan. It may take more time to achieve the priorities you originally set.’ .”
When clients come to her with investments recommended by friends or family, Jacobsen helps them get more information about the business and do proper due diligence. The same goes for real estate.
“If a client says, ‘I want to buy this house I just saw,’ I’ll say, ‘Why? Is it worth it? Who will use it? What is the long-term investment strategy? ”’ she said.
Where once professional athletes were partners in restaurants, car dealerships, and other consumer-facing businesses that profited from their image, today’s young athletes are fast-growing businesses with board seats. They want shares in high-tech companies. Advisers say cryptocurrencies and artificial intelligence are also popular.
After all, being a financial advisor to professional athletes is preparing them for life after the game. Many careers are short and unpredictable, especially in the National Football League. Advisers say they have to be their clients’ biggest cheerleaders while they play, but they also need to plan for the inevitable.
This includes everything from investment planning to building a second career to negotiating long-term brand deals and income assets.
“They realize that this may be their best bet to create huge amounts of wealth,” Jacobsen said. “They are taking this issue seriously, developing specialized teams, asking the right questions and starting to get involved.”