College athletes earned more than $900 million in the first year they could monetize their endorsement contracts.
Add that to the billions professional athletes make, and the result will be a pool of young millionaires in their 50s who will have to support themselves and their families without the ability to compete on a soccer field or basketball court.
After some famous athletes have been scammed and pressured for financial literacy by player groups, more athletes are turning to financial planners for help. The result has been a growing niche in the financial services industry with a prominent presence in the Twin Cities.
“The rate of getting into financial trouble after playing players is very high when you compare them to other people of their own wealth level,” said Jeff Locke, financial adviser at AWM Capital, a firm that specializes in Southern California. working with professional athletes.
After his time with the Minnesota Vikings, Locke took the field like teammate Kevin McDermott, who is Morgan Stanley’s assistant director of global sports and entertainment.
Speaking about its importance at National Football League facilities and on college campuses, McDermott said, “These athletes have dedicated coaches for over a decade and I am sometimes the first financial coach they meet in their lifetime.” financial planning and the realities wealthy athletes will face.
Locke and McDermott said the field will only grow with the NCAA change and as athletes’ awareness grows — and when they need help with their own charities and personal investments.
dealing with wealth
There were athletes who lost their fortunes by mismanaging funds shortly after their game days. Others have been scammed in high-profile cases. Former Timberwolves star Kevin Garnett sued an accounting firm for $77 million in damages in 2018.
McDermott said players can now turn to experts who can advise them on how to deal with a friend asking for money for a job or how to simply budget the paychecks that come in between September and April.
Locke said leaving professional sports was a roller coaster, so after working at a venture firm and a financial consulting firm, he jumped at the chance to work with athletes and entrepreneurs.
“It helps to have someone in your corner who has done this before,” he said. This experience allows Locke to engage in sensitive and sometimes uncomfortable conversations that most counselors may not know how to handle.
“It’s hard to teach a 22-year-old who has a few million dollars in the bank what to do with that money and think for himself at 50 or 55,” he said.
Minneapolis-based NorthRock Partners primarily manages personal finances for corporate leaders. After his first 15 years, the general manager of the National Hockey League became a client. Rob Nelson, the firm’s CEO, said that over the next seven to nine years, the financial consulting and wealth management firm began signing more professional sports business executives and players through referrals.
Last year, the company created NorthRock X, a dedicated section for athletes and entertainers, led by sports business veteran Aaron Ryan.
Nelson said that ten years ago many players sought help.
“I haven’t seen a lot of training requests from players all around, but now players want training in their careers after basketball or baseball,” he said.
Nelson said the firm now serves more than 100 professional athletes and team managers, making basketball the fastest growing sport.
“These athletes live in multiple countries and are seeking support and resources in multiple countries at the same time, and we want to be a resource in both,” Nelson said.
Ryan said the sponsorship deals for collegiate athletes mean a stable relationship line for NorthRock X.
“Working with them to help them mature as clients and young men and women is exactly where we want to be, because we will be looking back six to seven years. [ career] And they will be in a position that they wouldn’t have found if we hadn’t met.”
While Minneapolis-based US Bank has already offered financial education to college-aged athletes, in the fall it launched a collaboration with Opendorse, an endorsement marketplace for college athletes, on a financial curriculum platform called US Bank Financial Fitness. Accessible to over 90,000 athletes using the Opendorse platform, the video-on-demand library includes content on financial literacy, budgeting, taxes, and wealth building.
In July 2021, the NCAA, the governing body of college athletics, changed the rules to allow athletes to monetize their likenesses. According to Opendorse, between July 2021 and July 2022, US college athletes were compensated an estimated $917 million by companies that used their names, images, and the like, known as the NIL, to promote brands.
Opendorse expects college athletes to be compensated $1.14 billion by the end of the next 12-month period.
On3, a college sports digital media and data company, in perspective, the 2021 Tokyo Summer Olympics gold medalist and St. 1.5 million dollars. Former Hopkins High School basketball star and University of Connecticut All-American Paige Bueckers is in third place at $817,000.
“Familiar [NIL] “We have included many athletic students in this newfound income stream and we have an opportunity for them to seek advice or training on what to do with their money,” said Kaori Yamada, senior vice president of financial education at US Bank.
The partnership with Opendorse is not the bank’s first step towards financial health for athletes. In March 2022, US Bank was named the WNBA’s official bank partner and has since created financial education programs for the league’s players.
It’s about time
Following his basketball career, former NBA and University of Minnesota player John Thomas has worked with the National Basketball Retired Players Association to help both male and female ex-professionals transition to life after basketball.
It helped them understand how to continue making money by teaching the sport or connecting with the communities where they play to create long-term investments and wealth.
“After the career, it’s about having side conversations and building rapport,” said Thomas, who is now vice president of social responsibility for the Minnesota Timberwolves and Minnesota Lynx. “Most of my influence came from my relationships with businessmen and front office managers.”
As a young athlete, Thomas didn’t realize the importance of developing his brand or relationships with the many companies in the Twin Cities until his retirement.
He said that with college athletes now able to monetize their peers, it’s just as important for parents to understand financial planning.
“If your kids are used to helping sell products or services and you don’t know how to take the money and raise it for you, you will be in debt forever,” Thomas said.
Thomas said private financial services for athletes are overdue. It was only a matter of time before financial firms turned their attention to niches.
“Where there is attention, there is opportunity,” he said. “And athletes are getting a tremendous amount of attention.”
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