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Writer's pictureFreddie Vernon

Are You Managing Clients’ Money Like They’re Pro Athletes?



In some cases, maybe you should be.

Clients may be surprised to find out that they have more in common financially with professional athletes than they thought.

Many horror stories have been told about famous athletes that spend first and ask questions later. What doesn’t make the headlines is that this is not uncommon for the general public, as well. In fact, 78 percent of full-time workers in the U.S. say they live paycheck to paycheck, according to CareerBuilder.

For instance, according to the National Football League, the average career length of one of their players is less than 3.5 years. During this short time, the amount of wealth accrued by an NFL player is often only slightly more than the average lifetime earnings of a college-educated person in the U.S.—around $2 million.

Establish a Long-Term Budget

First, it’s very important to develop a long-term budgeting strategy, regardless of a client’s annual income or the length of their career.

The earlier they start budgeting for the long term, the more likely they’re to live comfortably without the risk of losing it all. Typically, the first thing a professional athlete, or anyone else with newly found wealth, should consider is tax strategies that help them shelter and protect their large income from being over-taxed. With an influx of money, excessive taxes and oftentimes improper spending, newly wealthy individuals may feel unprepared and without financial security for the long term.

For those who aren’t making millions each year, developing a long-term budgeting strategy is still very important, and such clients may actually have an advantage in this area. One of the benefits of accruing wealth over a longer period of time is that it’s easier to envision a long-term financial goal. With the average age of retirement in the U.S. approaching 65, we have much more time to look ahead toward those days of finally catching some well-deserved R&R, and that naturally creates a more budget-conscious mentality.

If your clients are serious about preparing for retirement, they should be saving or investing a minimum of 10 percent of their income each year, prior to spending. One popular rule of thumb is that by aged 30, the amount saved should match your clients’ annual salary at that time. Under ideal situations, ramping up from 15 to 20 percent later in your career will help your clients attain financial independence for themselves and their family.

Pay Yourself First and Spend Strategically

Encouraging clients to pay themselves in a systematic way can help them attain financial success in the long run.

Some specific examples for doing this effectively include payroll deductions from each paycheck or systematic investments coming out of a checking account each and every month. These can be tailored around a 401(k), 403(b), Traditional IRA or Roth IRA, to name a few.

When your clients finally do decide to spend, ensure they’re making reasonable decisions that help to build their overall net worth. We worked with a professional athlete once who had a strong appreciation for luxury vehicles—so much, in fact, that he was spending most of his monthly income on auto loan payments. While a luxury vehicle is nice to have, almost all vehicles are depreciating assets and that money would be better spent on something with more long-term value—maybe even a collectible car, which is the only type of vehicle that actually appreciates in value.

With regards to real estate, in particular, encourage clients to consider property with a strong future for resale, keeping in mind that “location, location, location” really does matter. Also, if they’re purchasing a home or something else of significant long-term value, look at the most cost-effective ways to finance the purchase, for example, should they finance more if interest rates are very competitive versus putting a higher lump sum down up front. In some cases, financing at low rates while your own money is building at a better rate can make more financial sense.

Maintain Wealth Management Year-Over-Year

A common pitfall that many people across all types of careers run into is not reviewing and maintaining their wealth management strategies year-over-year. You can’t force clients into your office, but one option is to help clients establish goals upfront to hold themselves accountable for where they want to be in the future. Goals will help them stay motivated to invest first, and spend second. Once these goals are set, reviewing them each year and benchmarking their progress toward the goals will help keep clients on track and hopefully consistently coming back.

One advantage the average person has on someone like a pro athlete is that those with a steady, long-term income usually build a future that is based on a more sustainable lifestyle. A short-term, high income career can derail quickly and the money earned in that short period of time won’t last long if an extravagant lifestyle has already been established. Consistent money management is necessary to ensure your clients aren’t spending more than they thought or saving less than they planned.

Injuries Aren’t Scary Just for Athletes

Finally, while injuries are a significant concern for athletes on a regular basis, disability should at least be a consideration for all clients as part of long-term financial planning. It’s important to be protected with a disability insurance plan as well as proper amounts of life insurance and thorough health insurance to help create continued income.

A general rule of thumb is to review clients’ investment portfolios on a quarterly basis at a minimum. This way, with a proactive planning group, you are providing the time to analyze and recommend what to do next.

At the end of the day, much of the wealth management advice we provide to our high-income clients, including professional athletes, can be applied to those with any level of income or career length. Whether you’re making $4 million over the next 4 years or 40, you should have a long-term budgeting strategy with multiple methods of investment, a strategic spending plan, and annual financial review and management practices in place.


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