Picture this, you are on a rocket ship but with limited fuel. It is fun while it lasts but you need to plan now for when the fuel runs out.
This is exactly what it looks like for professional athletes. Athlete wealth management is as much art as it is science.
It is a combination of understanding the nuances and having deep expertise to help professional athletes manage, protect, and build wealth to last decades.
I know this world because I lived this. I was the 9th overall pick in the 2009 MLB draft going from having a few hundred dollars in my bank account to millions overnight. I saw teammates struggle with sudden wealth and have seen the various pitfalls professional athletes fall victim to.
In this article, we are talking about the six key areas every player should consider when it comes to athlete wealth management.
Athlete Wealth Management
The elements of an athlete's financial life consist of the same six components as everyone else:
Financial Team - The who, what, and why of the team.
Cash Flow - The direction given to income being earned.
Tax Planning - The strategies implemented to reduce your lifetime tax bill.
Risk Management - The protection against the things we cannot see.
Estate Planning - The asset protection, tilting, and direction of wealth.
Investments - The growth engine needed to help athlete reach their financial goals.
While the components remain the same ~ the people, strategies, tactics, and solutions look far different.
That is why athlete wealth management requires a specialized team of people with deep expertise to serve professional athletes.
Financial Team
"If you want to go fast, go alone; if you want to go far, go together." - African Proverb
This rings true when it comes to athlete wealth management. It takes a team of specialized individuals working together to ensure success.
Let's break down the who, what, and how of each team member.
The Who
An athlete's financial team should consist of at least five professionals.
Financial Advisor
Certified Public Accountant (CPA)
Property & Causality Agent
Life Insurance Agent
Estate Planning Attorney
Remember, each of the five areas (cash flow, tax planning, risk management, estate planning, and investments) needs an expert to lead the charge.
The What
We understand the core five team members but what is the role each team member plays?
Financial Advisor - This is the point person advising, coordinating, and managing each element of your financial life. At Moment Private Wealth we serve as the main contact point for our athlete clients.
Certified Public Accountant - Taxes are an athlete's single largest lifetime expense. It is the role of the financial advisor and CPA to work together to ensure every strategy is explored to lower an athlete's tax bill.
Property & Causality Agent - The average professional athlete moves several times a year shifting between cities, apartments, and homes. This means multiple policies, things to protect, and specific home/auto/umbrella coverages are needed. The property & causality agent is the point person for ensuring proper coverages are in place.
Life Insurance Agent - Professional athletes take on life at warp speed. The most formative years of their adult life (20-30) are while they are playing. This often means massive wealth creation and increased family responsibilities. Life insurance plays a key role in planning for family protection and ultra-high-net-worth legacy strategies.
Estate Planning Attorney - Professional athletes are in the spotlight and with that comes increased risk and reduced privacy. The estate planning attorney is the expert in helping athletes protect, direct, and shield assets.
The goal of an athlete's financial team is to bring a team of experts together in one place.
The How
You understand who is on the team and why they are on the team but how do you choose the team?
To be frank, there are a lot of bad actors in the athlete wealth management industry.
These five criteria can help you choose who should have a place on your financial team.
Expertise - You are looking for someone who can provide level-three advice. They have lived it ~ they have done it themselves ~ they have helped guide others through it.
Experience/Credentials - As a professional athlete, you want an experienced and credentialed team. At Moment Private Wealth, our athlete's financial team consists of advanced designations such as a CFP, CPA, CLU, & JD on every client's team.
Service Model - A generalist financial advisor is not going to cut it for a professional athlete. You need a team that specializes in athletes and ultra-high-net-worth planning.
Independence - You want to ensure the advice you receive is in your best interest, and free of conflicts. Finding an independent financial firm best positions this.
Fit - The average financial firm serves clients with an average age over 60 and services several hundred per advisor. At Moment Private Wealth, we keep our client-to-advisor ratio small and our average client age is reflective of the professional athletes we serve.
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Simply put, your financial team should specialize in you ~ the professional athlete.
As financial advisors for professional athletes, we build, coordinate, and hold accountable all the members of an athlete's team. This allows you as the athlete to keep your focus on the field.
Cash Flow
You can only do three things with money ~ save it, spend it, and give it away.
Seems simple enough?
The problem? As a professional athlete, the typical financial advice need not apply. You are balancing accelerated earnings with a career whose lifespan could last just a few years.
As specialists in athlete wealth management, we help athletes navigate the unique planning that comes with a career.
Lifestyle Purchase vs. Reward Purchase
You can buy anything but can you afford it? That is the question you must answer as an athlete.
Let me explain...
A lifestyle purchase is something that you can sustain forever.
Example - An athlete budgets to buy a new car every five years.
A reward purchase is something that you make one time.
Example - An athlete buys his dream car after signing a new contract.
Cost of Being You
Basing an athlete's savings goals off of a percentage of yearly salary is a recipe for disaster
Instead, we must understand the cost of being you.
If the income dried up tomorrow, what would it cost to keep living the same lifestyle you are today?
We aim to answer that question first and then work backward to determine what percentage we should save versus what we should spend.
Example: An athlete earning $5,000,000 after tax saves 40% of his post-tax income or $2,500,000. By normal standards, this is a great savings rate. Yet what I see is an athlete who requires $2,500,000 in income to sustain his lifestyle.
From there, we want to work backward and understand how much money we need to save to continue living that same lifestyle. If an athlete can reach those nest egg goals, great! If not, we need to have an honest conversation about cutting spending.
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This is why I always preach to build the lifestyle slowly. The goal is to be able to keep living the same (or better) lifestyle after a playing career ends.
The key to that is understanding what you should save, what you can spend, and what you can give away.
Tax Planning
You want the good news or the bad news?
Alright, bad news first ~ Your single largest expense as an athlete will be your tax bill.
The good news? You can plan around it and reduce it.
Types of Income
To understand taxes you have to understand the types of income you can make as a professional athlete.
1099 Income - This is the money that you make off the field (endorsements, signings, sponsorships).
W2 Income - This is the money that you make on the field (salary and bonus from the team).
The next step is understanding how we want to think about this income.
Current Year vs. Future Year
In athlete wealth management, we are always thinking about the current year versus the future year's benefits. Much of this depends on what tax rate you are in as an athlete.
Current Year - This means you are getting a tax benefit in that given year.
Future Year - This means you are getting no current year tax benefit but you will get a future year one.
Example: If you are receiving a large signing bonus or in the midst of a free-agent contract we want to focus on the current year. If you are in a gap year (lower income) our focus shifts to future-year benefits.
Once we understand what our focus is, then we can narrow down which strategies to use.
Strategies
The challenge with professional athletes is there is no one size fits all when it comes to tax planning strategies. Yes, we want to reduce your lifetime tax bill but we also want to always ensure those strategies are getting you closer to meeting your specific goals.
Here are some of the most common strategies athletes need to consider:
State Residency
Legacy Planning
Charitable Giving
Contracts Structures
Tax Efficient Investing
Retirement Accounts
Duty Day Calculations
Tracking Deductions/Expenses
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We have helped athletes save hundreds of thousands of dollars with proactive tax planning. This takes a deep understanding of athlete wealth management.
You are filing in multiple states, dealing with countless cities, and need to ensure you are not leaving the IRS a tip.
So remember, while taxes will be your largest lifetime expense you can and should be planning around them.
Risk Management
Anyone can Google your name and find out just about any piece of information they want.
Your career is played at the highest level while putting your body on the line every day.
That lack of privacy and increased career risk requires an insurance strategy to match.
The three forms of life insurance every athlete should be aware of:
Property & Casualty Insurance
These policies protect your home, cars, and excess liability. Said another way, it protects you if the stuff you don't think will happen ends up happening.
Auto Insurance - Just like it sounds it covers your vehicles.
Home Insurance - The protection for one of your biggest assets.
Renters Insurance - The policies that cover all those short-term rentals.
Umbrella Insurance - The overarching protection that covers you if all other coverages are maxed out.
You are traveling the country in the spotlight at all times. Do not, I repeat do not look for the cheapest policies. Instead, look for the policies that provide you with the best value (price + coverage).
Life Insurance
Life changes a lot from draft day. I went from having no one depending on me to being married with four beautiful kids. I want them to be protected should something happen to me. That is the goal of life insurance ~ transfer the risk from you to the life insurance company.
Two Key Types:
Term Life Insurance - This covers you for a certain period of time (think 10,20 or 30 years).
Permanent Life Insurance - This covers you for your entire life (assuming premiums are paid).
Insurance is just that, insurance. It is not an investment. You will be pitched countless "insurance ideas", always revert back to rule number 1 ~ If you don't understand the costs, fees, and structure don't do it.
The starting point for life insurance is determining your need. What risk do you want to eliminate? Then determine what the is the best solution for you to solve that need.
Specialty Insurance
A professional sports career is like a piece of antique glass, valuable when fully intact but much less valuable if broken.
We want to ensure you give yourself the best chance to cash in your skillset. Oftentimes this means transferring the risk that the glass could break to the insurance company.
Specific Injuries
Loss of Future Value
Permanent & Total Disability
These policies are hyper-specific to you and your situation. It is paramount you work with an advisor who specializes in athlete wealth management to ensure you are presented with all of your options.
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Insurance is important. It is also misunderstood and misrepresented to professional athletes.
You want to find someone who can provide advice but has no conflicts of interest in selling you a specific insurance product.
At Moment Private Wealth, we advise on but make no money on insurance products. Simply put, this provides you the athlete the best possible advice conflict-free.
Estate Planning
I don’t like financial jargon ~ You know like “Estate Planning”, the first time I heard that I thought, “Isn’t that what old people do?”
Well, let me ask you this…
Have you worked hard to earn money from your sport?
Do you want to make sure that money is protected?
Do you want that money to have a future direction?
If you are anything like me, your answer is a resounding yes.
That is all estate planning is at its core.
You see you get one of two options with your money ~ The Government Plan or Your Plan.
Estate planning is the broad term for how you do this.
So, let's break down the key factors to consider for professional athletes.
Direction
Guardianship - Who will take care of those in your legal care?
Medical Directive – Who will make health care decisions if you can’t?
Financial Directive – Who will handle your financial decisions if you can’t?
Revocable Trust – Who will receive your money when you die and how will they do that?
Pour Over Will - Where will all those key belongings go that aren't able to be titled in your estate?
Consider your estate plan as the parking garage that houses your things. The direction is the guard at the exit to make sure those assets go where, when, and how you want.
Protection
Everyone can Google your name and figure out how much money you make.
That level of public information requires proper protection.
The parking garage you build around your assets (estate plan) provides you with the necessary protection.
In athlete wealth management, we focus on the trust owning as much as possible while the individual (you) owns as little as possible. In reality, you still own and control those assets but from a legal perspective, there is separation.
Titling
The most common mistake I see is professional athletes do the work to build the parking garage.
Documents are drafted and signed but the assets are never parked in the garage.
Let me be clear, without proper titling of your assets those documents are paperweights ~ they do nothing.
The key is ensuring your financial team helps you consider what assets should be titled in your trust and helps you execute that.
Taxes
The two knowns in life are death and taxes.
They are inevitable and everyone knows it.
What most don’t know is the government can tax even after you die ~ this is called Estate Taxes.
Estate taxes work like this:
The government takes a snapshot of everything you own upon your death, including any life insurance.
Any money over $13.61M at the time of your passing is taxed at 40%.
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As a professional athlete, you have the advantage of planning for this decades in advance.
Done correctly you can limit or potentially avoid these taxes.
So remember, when I said I thought estate planning was for old people?
Ya not so much, when it comes to athlete wealth management it is a key component from day one.
Investments
On one side you have the advantage of the greatest superpower that exists with investing, time.
On the other side, you have the disadvantage of a laundry list of unknowns.
What does next year look like?
What will my contract situation be?
What would I do if my career stopped tomorrow?
Investing for professional athletes is a constant tug between a decades-long time horizon and a day-by-day career.
The best decisions always start with the end in mind.
Consider this, your career ends, and your investments provide these two things:
1. The flexibility to choose what you want to do next.
2. The optionality to decide what that timeframe looks like.
In the simplest form, this is the perfect outcome when investing money for athletes.
You turn your future unknowns (an inevitable part of being an athlete) into something you control.
Consider your investments in three buckets.
1) War Chest – The investments that will be there for you no matter what. The returns are lower but the known is higher.
Cash
Bonds
Private Credit
2) Growth Strategy – The investments that will build long-term wealth while protecting the snowball you have built.
Stocks
Real Estate
3) Aspirational Strategy – The investments that could be home runs but could be strikeouts.
Private Equity
Venture Capital
Business Ventures
Simply put, your core portfolio consists of buckets 1 and 2. You need enough there that can sustain your lifestyle forever before diving into bucket 3.
Consider this, Warren Buffett has a net worth of $136 billion. More than 97% of that or $133 billion came after his 65th birthday.
Buffett didn’t suddenly realize something he had previously missed. In fact, he didn’t do anything different.
He just let time continue to be his superpower.
Compounding is funny, it is hard to see until it is impossible to ignore.
8 + 8 + 8 + 8 + 8 = 40
8 x 8 x 8 x 8 x 8 = 32,768
See what I mean?
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Athlete wealth management is about approaching investing like this:
What is a good (if not great) rate of return we can sustain for the longest possible period in time?
To win the game of investing, you just need to stay in the game long enough.
After all, time is your greatest superpower.
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Here is the deal ~ managing your wealth as a professional athlete from the start matters.
You have one chance to do this right.
Money mistakes you make are not like stubbing your toe, it is more like breaking your leg.
You are on a rocket ship with limited fuel ~The best time to start looking at how to land that rocket is now.
I say this because I have walked in your shoes.
I made millions of dollars from the time I was 18 to 29 years old.
I made smart money moves for a decade that set my family up for future decades.
As specialists in athlete wealth management, we can help you do the same thing.
If you are a professional athlete who is looking to find a financial team that specializes in you, schedule a call, and talk with a Moment founder.
Not sure what questions to ask, check out this video on 10 questions you should ask when interviewing a financial advisor.
Get in Touch With An Advisor
Frequently Asked Questions
Here are some answers to questions I received frequently about this topic.
Are you a fiduciary? Moment Private Wealth serves clients as a fiduciary 100% of the time.
How does Moment Private Wealth make money? We are only paid in one transparent way, by our clients. We receive no kickbacks or participate any profit sharing arrangements. Our fees are simple, transparent, and clear for our clients.
How are you different than other financial advisors? We are specialists in working with professional athletes and entrepreneurs. We limit the number of new clients we take on. This allows us to provide unparalleled value and highly personalized service to professional athletes. We work as a team to service our clients. We believe in building a team of “A” players. This ensures our clients receive world-class tax, estate, insurance, and investment strategies. We focus on educating first, then executing.
Where do you hold my investments and how can I see them? Moment Private Wealth uses Fidelity Investments as a third-party custodian for our client investment accounts. As a third party custodian, Fidelity safeguards and provides reporting to you and the IRS each year. Client can also access all financial information via the Moment Private Wealth Client Portal.
How do you work with other members of my team? We believe in the power of the team. For most of our clients, their team consists of Moment Private Wealth, an accountant, an attorney, a banker, and an insurance specialist. We help our clients build out their team of individuals or work with existing partners clients have. Our goal is to ensure every family has a team of experts to protect their interests.
How do you choose investments for clients? As independent financial advisors, we can gather research and make recommendations based on all available options. We determine clients’ portfolios in partnership with some of the largest asset managers in the world. Each quarter, we have calls with teams of CFA (Chartered Financial Analysts) to ensure our clients are receiving the most up-to-date strategies and recommendations.
What does your average client look like? Our clients are nearly all athletes and entrepreneurs. Our average client has a net worth greater than $5M. The strategies, solutions, and planning that we implement have a high-net-worth and ultra-high-net-worth client in mind.
Why should I consider hiring Moment Private Wealth? Great question! But first, let us explain why you shouldn’t hire us. If you’re looking for an advisor who will pitch shiny object investments or be a “yes man” you are in the wrong place. Why? Because we believe in being truth tellers and only giving advice that we take ourselves. The investments, strategies, and planning we do are all things our advisors do with their own money. If you are an athlete or entrepreneur interested in things like lowering your tax bill, investing smarter, and finding a trusted partner we might be a good fit.
*Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.
