Financial Advisor for Athletes: A Guide to Creating Your Financial Game Plan
Professional athletes are well aware of the need for coaching and guidance in their respective sport and look for the best advice available to succeed. The most skilled player still needs objective insights on technique, strategy, and training methods. This same principle applies to an athlete’s finances, although it may be less of a priority for many players. Given the constraints of time and interest, where does an athlete find the right resources to create a complete financial game plan?
The answer lies in selecting an experienced financial advisor for athletes, who understands the nuances and challenges of guiding a high-income sports professional. A young athlete earning millions is especially vulnerable to making poor or uninformed choices, and this is where a financial adviser is invaluable.
Do Athletes Use Financial Advisors?
Many athletes use financial advisers, but there is a wide range of expertise or specialization. For example, an accountant can handle an athlete’s tax planning and filing but may be less prepared to offer long-term investment advice. The goal should be to hire a financial advisor with a breadth of experience and skill in all areas of planning and execution.
Why Do Players Need a Financial Game Plan?
Players need a financial game plan for the same reasons as anyone, to create a sustainable future and retirement. However, these reasons are more pronounced for athletes who typically earn the most income in their 20s and 30s. Lack of a financial game plan exposes a player to overspending, high taxes, low investment returns, and economic uncertainty.
The ‘front-loaded’ earnings for athletes early in life may create a false sense of security. There are potential factors that have lasting consequences such as:
Early retirement. The average athlete retires by age 30, and many at a younger age due to the physical demands of their sport.
Unforeseen injury or illness. Injuries have interrupted the careers of many promising athletes, putting a strain on finances if not planned for.
Low financial proficiency. Finance is not emphasized in most educational systems, so many athletes may not understand the implications of their current decisions.
Poor performance. To continue earning, an athlete must perform well or they will be replaced or supplanted by others.
These points are well understood in sports and represent constant possibilities that should motivate athletes to make a concerted effort to find the best financial adviser.
How to Create Your Game Plan With a Financial Advisor
Creating your game plan with a financial advisor requires the same discipline and strategy as with a sporting event. Most athletes focus on multiple performance areas when preparing for a game or match, all with the input of coaches and trainers.
A financial advisor for athletes will take the same professional approach, preparing a diverse strategy designed to span a lifetime and create financial stability. Your financial game plan should include the following elements:
Accurately Project Cash Flow
Cash flow is simply the difference between income and expenses and largely determines how much can be set aside for investments. The goal is to achieve regular positive cash flow and project that into the future. In the cash flow game, athletes must overcome the pitfall of high expenses to retain the most net income possible.
Budget Expenses & Lifestyle
Probably the last thing a young athlete wants to do is create a budget, especially if they come from a modest background and can finally spend freely. But a budget is the best tool to manage expenses and free up capital for investment. The primary goal is to be realistic while still enjoying their new lifestyle. This is where a financial advisor can lend their insights to an athlete.
Manage and Diversify Investments
Once the financial advisor has set up an athlete with their cash flow and budget, the next step is selecting a diversified investment portfolio. Investments are structured to account for risk, return, and maintaining capital, with regular rebalancing as market conditions change. Considering there are hundreds of investment vehicles, most athletes won't know where to begin on their own and might rely on casual advice from non-professionals.
Implement Tax Saving Strategies
Taxes take a large bite out of income and bonuses, and an experienced financial advisor will know how to implement tax strategies to increase savings. By maximizing deductions, contributing to retirement plans, selecting a low tax domicile, and claiming business expenses, an athlete's tax bill can be lowered significantly.
Set Up Comprehensive Insurance Policies
There are numerous insurance products that add to an athlete’s financial security. Typical policies that insure for injury, death, or disability are always a wise choice, but some policies are more tailored to athletics. Some athletes decide to insure their body parts as one well-known European football star did, insuring his legs for $195 million. This type of policy (or amount) is not for every athlete, but it does illustrate how insurance can protect finances from the unexpected.
Create an Estate and Trust Plan
Estate planning is the final piece of the financial game plan, where an athlete can choose a distribution plan for their assets. The plan can be reevaluated and adjusted periodically, to account for changes in family, assets, and tax policies. It is never too early to include estate planning strategies in a financial plan, which naturally includes providing for an athlete’s family. Certain estate planning tools have the double impact of also reducing current taxes.
How to Select a Financial Advisor for Athletes
Selecting the right financial advisor is an important step, as an athlete will rely on the advisor’s guidance to secure their future. The first thing to look for is direct experience with athletes and their families, and an understanding of the unique earning potential in a short period of time. A qualified sports financial advisor will have an established track record within the sports industry, handling the finances of high-earning athletes.
A financial advisor should offer all of the core elements of a financial game plan, with access to a support team of specialists. Only then can an athlete comfortably rely on their advice and strategies, knowing the methods are tested and customized to meet their needs.
Work With Specialized Financial Advisors for Athletes
Premier Sports Network partners with financial advisors that specialize in athlete planning. A sound financial game plan is central to our approach to athlete care, and our partners are well prepared to guide athletes at any stage of their careers.
Contact us to learn more about how our financial advisors for athletes can help you create a future of economic certainty and prosperity.
