In his 10-year career advising top pro athletes about their money, Todd Burach, vice president of sports and entertainment banking at City National Bank in New York, has helped steer clients away from the kinds of financial disasters that are all-too-common in sports.
While there are some pro athletes - like Magic Johnson and Mario Lemieux - whose post-playing careers prove even more lucrative than their time on the court or rink, they tend to be outliers. More commonly, young players faced with sudden windfalls, shortened careers and lack of financial literacy struggle to maximize their incomes over their lifetimes, Burach said.
So what are some ways to boost the financial futures of these talented athletes?
Burach calls these five ideas a good start:
- Promote financial literacy: It's not just future athletes who are financially illiterate, Burach said. The majority of Millennials are ill-equipped to manage their financial lives. And while basic financial literacy concepts are a necessary building block for future pro athletes, there are also unique issues and challenges that athletes must be prepared to confront. As they experience decades of financial decisions and earnings in just a few short years, athletes must learn how to say "no" to friends and family and how to hire and evaluate the right financial team, along with more complicated challenges such as trust, estate and tax planning.
- Redefine "cool": Athletes must see "business savvy" as something that is desirable. Being smart with money should be valued in the locker room, not just the board room. As athletes' identities begin to take shape early on when their lives are focused exclusively on sports, encouraging young athletes to be more well-rounded helps with the transition out of sports by promoting confidence in many different environments, with many different people.
- Surround players with good coaching: The athlete's "off-field coach" - for example an agent or business manager - is an integral part of the decision-making process. These coaches need to be educated on how to best deal with changing athlete dynamics and they need to be teaching their athlete clients every day, paying particular attention to when athletes change course. The transition between a sports career and a life post-sports is most critical, as personal relationships, cash flow and even the athlete's identity changes. Productively and honestly working through transitions with "off-field coaches" is crucial.
- Actively encourage saving: The 2011 NBA collective bargaining agreement required 5 to 10 percent of player income be automatically opted-in to a retirement savings account. This means, rather than requiring the NBA athlete to consciously make the decision to save, he is enrolled in a savings program unless he actively opts out.
"Research has shown this subtle change can be a key factor for future financial success and the leagues and players associations should support more of these efforts to nudge athletes in the right direction," Burach said.
- Facilitate conversations and academic research: Documentaries such as "Broke,"articles like Sports' Illustrated's "How (and Why) Athletes Go Broke," panel discussions organized by media outlets such as Variety and City National Bank-hosted events, including a dinner series called "Coaching Athletes off the Field," are all important ways to get athletes and industry change-makers talking and sharing best practices. More studies are needed to understand all the factors at play in athlete financial success - or failure.
"While athletes often get media attention for their financial missteps, it's important to note there have been many positive changes in recent years," Burach said. "Universities, sports leagues and financial institutions should team up to study the qualitative and quantitative factors that determine how athletes' make financial decisions and how to help them succeed for life - on and off the court."