Justin McCarthy knows that when it comes to saving, investing, and planning for life ahead, there’s no off-season.
McCarthy, a New York-based managing partner and Certified Financial Planner with Mariner Wealth Advisors, works with more than 100 current and retired professional athletes. And each of his clients receives an education about having attainable, manageable financial expectations.
“A good adviser’s goal is always trying to create a focus on what your balance sheet is today, what it can be in a certain period of time, and what that lifestyle could be later on,” he says. In that light, his job isn’t simply to help assess a client’s risk tolerance or investment style, but also to help that client determine their vision. Adds McCarthy: “Essentially our goal is not just to educate on the nuts and bolts of how to get there, but also start painting a picture of the future if you do the right things and continue to grow your balance sheet.”
McCarthy says he sees the high-earning professionals he works with as no different than an innovative startup that becomes a success. While each client’s scenario is different, McCarthy says it’s all about what steps you take, while reevaluating your moves along the way. Those steps include:
• Have a gatekeeper: As the ESPN documentary “Broke” once demonstrated, pro athletes get approached aggressively by entrepreneurs, friends, and even family members, about how to use their money. The 2012 film also showed that a hot tip on a new investment opportunity frequently ends in financial disaster.
Says McCarthy: “Lots of times it’s (ideas such as) partnering in a bar-restaurant or putting up money to start a new car dealership, that might sound great. Whether there’s a real business plan each idea is another matter altogether.” A reputable wealth adviser, accountant, or business manager as a gatekeeper can help you make sound decisions while keeping hucksters away.
• Plan, budget, and keep funds separate: Many of McCarthy’s clients have more money than they’ve ever had. McCarthy says that it is critical to separate funds for daily living so that daily spending does not get out of hand and wreck retirement savings and college funding. He adds that if an adviser can work with an athlete early in their career and get them planning and investing sooner, the results are better and later options are more numerous.
Says McCarthy: “For someone, let’s say an established athlete in their second NFL contract — if they get another contract they’re probably not going to be making the same money (as before). So, it’s important to establish a new, more realistic budget.”
Professional athletes typically have a different range of earning years when compared to other high-income earners. That’s because an athlete’s top-earning years are essentially front-loaded. While surgeons or bankers, for example, can earn more money over years and likely more with experience, McCarthy says that “typically athletes are looking at a much shorter span of time to create earnings. Then those earning years can abruptly stop.”
To be sure, statistics show that the average NFL career lasts only 3.3 years. While first-round draft picks on average have a career almost three times longer, no athlete is immune to injury. Meanwhile, according to USA Today, baseball, basketball, and hockey players typically have a professional career of not much longer than five years.
Accordingly, the only absolute control players have is what they do off the field. Says McCarthy: “I tell my clients ‘let’s not create the lifestyle now that’s in excess of your income now’. (We) consider the contract and guaranteed money an athlete has now, and consider what they might make in the future based on how their career goes.”
While McCarthy says that most of his clients are committed to the planning process, he does get calls from athletes, and sometimes concerned family members or managers, asking for help.
“Sometimes you see athletes in the middle of their career earning lots of money with nothing to show for it, with six-figure-a-month credit card bills,” McCarthy says. “Everybody wants to be in a better position, but obviously the person at the other side of the table has to be willing. If you are planning correctly with your client, their mindset should be how they would like to live long after they hang up their cleats.”
Andy Frye is a freelance writer. Follow him on Twitter at @MySportsComplex .
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