Holding on to their wealth isn’t easy for many players. Jack Bechta
Seventy-five percent of NFL players are broke within 3-5 years of playing their last games.
The seventy-five-percent statistic isn’t necessarily accurate. The NFL may argue that this number has never been verified and is grossly exaggerated, and there have even been surveys of retired players that put the number at closer to 40 percent.
Here’s the problem: First, when these phone surveys are conducted, they can only reach the most stable players who had the same phone numbers for years. Second, those who are broke are embarrassed by their situations and are usually difficult to locate. They also don’t always come clean or even participate in the surveys.
The NFL players union has been trying to help players by hiring an investment czar in charge of registering and monitoring financial advisers. This office works hard to educate the players and sets high standards for the advisers. The registration process filters out the worst of the worst, but it doesn’t necessarily attract the best of the best. Furthermore, players usually select advisers who aggressively recruit them and represent other high-profile players, so they aren’t actually seeking out the highest qualified adviser but are interviewing only those who pay them the most attention -- the same way they might handle the agent-selection process. Selecting an adviser who aggressively recruits isn’t a bad thing because these individuals have to promote themselves, just as I did when I was in the business.
I’m personally skeptical of firms or individuals who solely solicit athletes. I would like to see that my clients’ investment advisers also work with high net-worth professionals outside of sports. For the most part, I’ve been impressed with some of the investment professionals who have solicited my clients’ business.
For those who are broke after football, there are the unscrupulous John Gillettes and Don Lukens of the world who were the reason for the players’ financial demise. However, the players are their own worst enemies because they simply lack fiscal discipline and don’t do the math. Even those who selected the worst of the worst advisers usually ignored all the obvious signs because their vanity was being massaged all the way to bankruptcy.
Many NFL teams and the league itself commit resources to educating the players. During the annual rookie symposium, the league brings in well-known retired players who share their stories about misguided financial decisions that are meant to get the rookies’ attention. They also offer sage advice on how to avoid making the same mistakes of those before them.
With the collective efforts made by agents, financial advisers, vets, the NFL and the players association, there doesn’t seem much change to the 75-percent trend. To have time, money, status and fame at the exciting age of 23 is a challenge for anyone to manage. I always hear people criticizing young athletes for being stupid with their money, but I guarantee you most of us would have made the same mistakes given the opportunity.
I personally believe that 75 percent of players have spent and lost most of the money they made during their careers within about five years. They simply have a hard time adjusting their lifestyle below their new income level. In addition, since a lot of money came fast and easy from the NFL, there’s a sense that some company may pay them a nice salary to be a hand-shaker. The biggest mistake players make is that they spend to the level of their income with the idea they can stack up their cash in the last two or three years of their careers. However, those years never seem to come, and their careers end prematurely.
Another problem young players face is that the people around them become enablers. They don’t do it on purpose; they simply get a taste of the lifestyle that status and cash can offer and don’t want to stop the ride. So when Johnny Starter buys his mom a new house or car, she doesn’t always say, “No, son, you save your money for now. See how many years your career lasts. We’ll see how much you have put away before buying me anything.”
Spending is a bad habit. In my book, the No. 1 service a financial adviser can offer is fiscal discipline, which takes some guts and an ability to be stern, which is rarely found in the industry. The greatest financial advisers sometimes lack the ability to stand up to their clients’ bad habits. They don’t want to be the ones to stop them from buying a lifestyle above their means in fear of losing them as clients.
The reason Kirk Ferentz, Urban Meyer and Nick Saban get the most out of their players is because they draw lines in their programs that players know not to cross. They command respect, and their players do as they’re told. These coaches represent the personality types to keep players from going broke because they tell them what they need to hear, not what they want to hear. They would make great investment advisers.
Every player needs a financial coach in their ear to educate them and design a strict program that will result in great fiscal habits. It’s the players’ important responsibility to find the professional(s) who will make them better and guide them toward the 25 percent who have held on to and created wealth.
Follow me on Twitter: @jackbechta
Jack,
How would you suggest the NFLPA rework, if at all, the registration process and program in general? Would you advocate a mandatory fee-only list of advisors? I'm constantly hearing how underserved professional athletes are when it comes to financial advice, especially NFL players. But you'd think that if it were simply a matter of better financial advice, we'd stop hearing about these problems in a few years. As it is, I've been hearing about this issue for decades. So I would imagine there is something else, systemic, that is perpetuating this issue. You alluded to the players themselves, and that might be the issue - the NHL players I've worked with in the past were pretty easy to guide in terms of spending. Granted, that may not be true for all of them, but why do you think the NFL stands out in terms of poor results financially for the players?
The NFP was not loading online last night while the Wire Ticker had a story up about Jamarcus Russel already having some finance issues?
The stats on this are interesting but I think it's a bit of a stretch to say most of us would blow through millions if we were in the same situation. You don't have to be a financial professional to know not to spend your money like an idiot. Maybe it's incorrect to assume that these guys are actually taking their education somewhat seriously at the D-1 level but I'm not sold on the fact that if you took a sample of people who have completed four years of college and explained that they would make a large amount of money over a short period of time that 75% of them would end up broke.
I read a first person account in SI or ESPN the magazine last season from a retired player addressing this issue. I don't remember the break down, but once you factor in agents, attorneys, managers, taxes, etc., these guys don't really take home that much. The guys with the multi-million dollar contracts are a small percentage of the total number of players. The rest who play for several hundred thousand a year are taking home pretty average salaries, and most for only a few years. Amortized over a normal 40-50 year earning period, supplemented by whatever they do after retirement, most of them aren't getting rich, even if they are frugal. Only a select few get endorsements, only a few go into broadcasting. The rest end up selling cars or insurance.
"I think it's a bit of a stretch to say most of us would blow through millions if we were in the same situation"
I don't. A very small % of my friends saved money in their 20's. Most of us spent more then we earned. If we had more money we'd have spent it.
You or I might have to deal with ruthless professional thieves once or twice in a lifetime. These kids deal with dozens in a year.
At 23, having devoted their lives to learning the game of football, they're thrown into a world of people that are every bit as good at tearing their finances apart, as the athlete is at running a curl pattern.
Money can be as much a curse as a blessing.
@Mark F- I don't disagree with your point about spending more in theory but it's relative to how much money we're talking about. If you're talking about blowing through a salary of 80k vs 40k, sure. But if you're talking about blowing through $500k or $1 mil then you're just spending like a moron if you know what the average NFL career is. Most people spend unwisely to an extent when they're that young but there are different levels of unwisely.
I'm sure there are plenty of shady money managers, etc. trying to get at these guys money and hopefully they have enough older, wiser people they trust to help them navigate that but I'll never buy into the notion that "money can be as much of a curse as a blessing". That's a covenient way to rationalize not knowing how to be responsible with it. I agree this is an area the league can help with recommended financial advisors, etc but to write it all off to be young is still a stretch in my opinon.
As a financial advisor what I have seen is that many in my field are after the commissions and not any type of holistic approach for their clients. I've also seen a lot of criminal fraud which goes unpunished.
I have never solicted athletes because the effort required is counter-productive for my business. There may be some status to working with a pro athlete but the amount of time required to acquire and work with an athlete isn't as profitable a concentrating that same amount of time working with doctors. Doctor's careers lasts a lot longer as well.
The smart guys gravitated to smart people right out of college and continue to do well after their career ends. The majority don't and run out of money fast. I'd say the number may not be 75% but is probably over 60%.
Todd09 I respect your opinion and thanks for responding. Probably our outlooks are a reflection of our own personalities maybe?
Were I an NFL athlete I'd have hit 30 broke and owing taxes, so the fact that I fit the profile may skew my opinion. Maybe you're in the 40 % Chris V informs us do OK and that drives your opinion?
If we played on the same team I'd have borrowed money from you, and you'd have told your friends what a nitwit I was, and since I would have owed you money you'd have been right and I would have had to eat it :) I'm a handsome bugger though and would have found myself on the hunt for a nice lady who divorced a good money manager, but still has a soft spots for jocks, and half her old one's cash...that would have been my business plan. heh heh
Chris V thanks for sharing. The reward/effort thing is interesting, but locker rooms can be tight places; no? Wouldn't an NFL locker room be as great a referral source as an exclusive country club? Really wouldn't it be better as NFL locker rooms refresh themselves yearly while country club membership can become stale-yes? No?
Doctors careers last a lot longer, but if you do right by say 5 athletes your name will live in that locker room for the balance of your career.
Am I wrong here? I'm a simple layman and wrong a lot so please feel free to join the growing ranks of those who have pointed out my knowledge gaps to me :")
I can see this as I've read and heard articles similar to this before. That's why I'm a little surprised that kids with equal ability in baseball/football opt for football when baseball careers last a whole lot longer (barring injury) and pay better over the long hall as well as being guaranteed for the most part. I hope Jake Locker is listening.
In relation to being young and burning through this cash, I can see it but we are all made differently. Look at the culture today or the last 40 years w/the advent of Madison Avenue - buy the best, keep up w/the Jones, perception is everything.
Even the very wealthy get scammed. But the person who was talking about taxes, mangers, hanger-ons, etc, is speaking the truth. Think about a lotto millionarie - it's very much the same thing. Often these people are duped out of loads of money and if they don't keep their spending down, they usually are back where they started in 5 years or so.
We often then say that these people were "stupid" or ignorant". In some cases that's true. Most athletes don't legitimately pass classes, most don't take business classes, and then come out of college with a worthless degree that really doesn't mean anything and half of them can't spell correctly. They think when they come out of college, make a team, they think they have it made, but the average NFL career is 3-4 years - not a whole lot of time to make a nest egg to last a life time, especially when you include all the fees, managers, agents, etc.
Like was said, few get endorsements, few go on to lucrative careers, few are willing to put in the work to become a coach for either the lower salaries or the drop in prestige. Some never graduated and don't have anything to fall back on. Add on any medical issues that would limit them in the real world and you're talking about a bleak existence.
True, they get a shot, but if they aren't very careful with that shot, it's usually used up by the time they are 30. Don't forget, at the ages we are talking about, most of us bank on our future years and think that we are invincible and that what happened to some has been is not going to happen to me, because I'm special. Unless they really are, from a mental standpoint, they usually aren't.
Plus, add in that a lot of these kids haven't seen real money like that ever and have come from a life of poverty, they can't help themselves from trying to live the life that is shown on various shows and feel that they can have that lifestyle finally. Add in family and friends that they feel they owe, and the pie slice gets even smaller.
It's easy to criticise if you've never been in the situation, but I must imagine that it's much more difficult to walk in the shoes of someone who once had it "all" and now has nothing or less than nothing and all those investments that seemed to good to be true, weren't.
Isn't this topic akin to people that win lotteries and end up in bankruptcy? I couldn't imagine what it would be like to suddenly have no financial limits in sight.
I better get off the web and back to work!!
have you ever heard of 30 year annuity contracts from the team to the player??????
if so, it'd be interesting to hear about it.
If not, I think it's a good idea.
very good article Jack. I read it over breakfast and it was very digestive. Lots of good, hard facts. Keep giving your player clients a hard time using these facts and some will get it. Great job, tim and eric .
Jack, awesome articles as always, quick question do you need a degree to become an agent, or what kind of road donyounsuggest for someone to get into the business. Thanks and I will continue read your articles!
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May 17, 2010
12:55 PM
Really interesting article, thanks.