The sports industry in the US was worth some $422 billion in 2011 according to one estimate from Plunkett Research and creates some very wealthy individuals. With many athletes suffering from bad financial advice, there is an opportunity for the wealth management industry to raise its game.
To give a taste of some of the salaries athletes earn, the New York Yankees – which has the highest total payroll of the Major League Baseball teams – paid an average salary of 6.8 million in 2011, according to data from USA Today. In the NBA, the Los Angeles Lakers – with the highest overall payroll - paid an average of $6.9 million in 2010.
Of course, for many sports stars their pay from playing may be a small component of their overall packet, with lucrative sponsorship and advertising deals on the table. But as wealth managers know, this kind of pay packet combined with media attention brings as many challenges as it does opportunities.
Many of these challenges are the exact same as those faced by other HNW individuals, with one big exception, says Paul Tramontano, chief executive of Constellation Wealth Advisors, a family office that works with sports industry clients.
That exception is that compared with a patriarch or matriarch, who has built a successful business over a long time, athletes are “more like lottery winners”: they have the monetary event early in their careers, and before they are well prepared with a team of trusted advisors, says Tramontano.
And he says that while oftentimes athletes are surrounded by a good support network of family, friends and an agent, when it comes to finances “the great majority is guided by the wrong people.”