Young athletes are often easy targets for shady investment advisors, with tragic consequences.
Take Tim Duncan, the retired San Antonio Spurs basketball champion, who lost millions to his former financial advisor, who pleaded guilty to fraud and was sentenced to prison in 2017.
Or the director of the National Basketball Players Association's primary financial advisory firm, who was arrested in 2013 for forging a signature on a contract to try and retain the union's business.
CBS' 60 Minutes did an investigation in 2016 that exposed the NFL Players Association's failure to vet those who registered for its financial advisors program. Several players lost a total of $43 million due to a bungled investment scheme in that case.
Successful athletes, who tend to come into large sums of money at a young age, may want to take a conservative approach that puts safety first and takes into account their likely lack of career longevity when developing an investment strategy with their advisors, said Boris Gluzberg, who works with professional athletes as a senior vice president at City National Bank.
“The professional athlete takes risks on the field, so there should be no risk-taking on the investment side," Gluzberg said. “It should be all about preservation of capital because an athlete's career can be limited."
He recommends that his player clients put together business management teams that include: A sports agent; financial planner; CPA; and lawyer. Good agents will welcome that kind of support team approach and not be threatened by it, Gluzberg said.
Here are some of the additional tips Gluzberg gives his pro athlete clients who are choosing a financial advisor:
“You need to learn to budget because you're only getting paid eight months out of the year," Gluzberg said. “A good business manager will know that and create a budget for the player and for the family – because in many instances these players support their families."
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