George Martin knows football. He played with the New York Giants for 14 years and holds the record for most touchdowns by a defensive lineman. Martin didn't know as much about finance, so in the mid '80s when someone purporting to be a financial advisor told him to invest in oil and gas limited partnerships, he did. When tax laws changed, he lost all his money and had to pay steep penalties and interest.
Martin was lucky. He had a long NFL career and then, a successful business career. Many players aren't as fortunate. So when MONY Group asked him to develop a division tailored to pro athletes' financial needs in 1998, Martin jumped at the chance.
“I've seen it up close and personal,” Martin says. “I was a victim who trusted the wrong people and was not paying attention to my finances. When you've been through a situation where your trust has been abused, you never want that to happen to anyone else.”
Today MONY's sports financial services has 13 financial advisors and 80 clients, most of whom are men between the ages of 21 and 28, with about $30 million in assets under management. Clients include Carlos Delgado and Jose Cruz Jr. from the Toronto Blue Jays, Sam Garnes with the New York Jets, Brian Jordan of the Los Angeles Dodgers and Chris Chambliss, a former first baseman with the New York Yankees.
Financial firms realize celebrities need advisors who know how to deal with their sudden wealth, and sometimes just as sudden, loss of income. In April, Baltimore-based Legg Mason launched ProPartners Wealth Management, which is working closely with a sports agency. Once the athlete signs his contract, Legg Mason helps him set up a budget, a financial plan, a retirement plan and a diversified portfolio. “Our goal is to help these talented young athletes and entertainers who have become wealthy stay wealthy,” says Peter Bain, a Legg Mason executive vice president.
There are plenty of moneyed young celebrities. When Fortune magazine compiled its “America's 40 Richest Under 40” list last fall, six were either entertainers or professional athletes, including Sean “P. Diddy” Combs, Michael Jordan, Tiger Woods, Tom Cruise and Jim Carrey. Even less famous athletes command big bucks now. In the last decade, Bain says, “an enormous amount of wealth has flowed into athletes' pockets.”
Seasoned vet Tom Rathman, a San Francisco 49ers coach and former fullback, knows all about the potential perils of sudden fame and sudden gain. “You've got to have someone who relates to you on a personal basis and recognizes your needs and goals,” says Rathman, who relies on Newport Beach, Calif., rep Richard Hearn to help him plan for a life after sports. “Richard is a hands-on manager who's always there for me and my wife. He knows family comes first with us, and he helped us make sure our future would be comfortable. He's a class act.”
To ensure more money stays in their pockets, the National Football League Players Association in February set up a screening process for financial planners. It estimates that in the last several years, 78 players have been defrauded out of more than $42 million — that's just counting those who came forward. “It's an endemic problem,” says Kenneth Ballen, director of the association's financial advisor program.
Financial planners who want to work with NFL players have to be licensed and pass an extensive background check. So far, about 150 advisors have been approved. If sports agents want to work with NFL players, they have to be registered in the program, or refer their players to financial advisors who are. Ballen expects the other players' unions to follow the NFL's lead.
Passion Play
Five Prudential Securities brokers have passed the test: Ken Ready in Denver; Peter Borowsky and Brian Kelley, a New York-based team with $100 million under management; and Joe Linta and Tom Madigan, who oversee about $50 million out of New Haven under the JL Sports shingle. The one thing other than Prudential that they have in common? An obsession with football.
“If a client came in here and wanted to invest $800,000 and they were into opera, I wouldn't be that excited,” says Linta. “What I get excited about is if someone can tell me who the starting left guard is for the New England Patriots.”
Linta, like some other financial advisors, also acts as an agent for clients. In a bid to lure football players to his practice, he agreed to negotiate offensive guard Will Shields' first Kansas City Chiefs contract for just $500. “I was hoping it would pay off one day,” he says. It has. He just negotiated a $26 million pact for Shields.
Ready takes care of virtually all of his clients' finances, including their monthly bills. If a player needs help buying a home or a car, his staff guides them through the process.
Trust is a big issue. Many will work only with financial advisors recommended by friends, lawyers or accountants. “You can't just call up Barbra Streisand and have her pick up the phone,” says Todd Morgan, chairman of Bel Air Advisors in Los Angeles, who left Goldman Sachs in 1997 to start his own firm, which now has $3.6 billion worth of assets under management. About a quarter of Bel Air's wealthy clients are entertainers, including Streisand and Sylvester Stallone. “Celebrities are a little more cautious; they've been burned a little bit more,” Morgan says.
Take, for example, the A-list stars defrauded a while back by Dana Giacchetto, who is now behind bars after pleading guilty to misappropriating funds to his personal account. Celebrity clients — who lost as much as $10 million — included Leonardo DiCaprio, Matt Damon, Cameron Diaz, Courtney Cox Arquette and Ben Stiller.
Martin helps Tom Mingone, president of Capital Management Group, an independent New City, N.Y. advisor with $100 million under management, break the ice with celebrities.
Of his more than 250 clients, Mingone handles 10 football and baseball players through MONY's sports division. To find new clients, he holds seminars at spring training camps and works with scouts to target promising players.
“A lot of sharks in the water come at these guys,” he says. “Athletes like other athletes and with George the barriers come down. They trust George.”
Financial Coaches
Unlike most investors, whose earnings will steadily increase, entertainers and pro athletes make most of their money when they're young, making a financial advisor almost as important as a coach. And who knows if an entertainer will have another hit song or blockbuster movie. “They may be in their 20s, but they have to invest as though they're in their 50s,” says Frank Zecca, vice president of Octagon Athlete Marketing and Representation in McLean, Va. “We want them to do what they want when they retire and not worry about money.”
Budgets are key to a worry-free future. That may sound simple, but it's hard to convince young, successful clients to live within limits. For many this is the first time they've been on their own. They may not know how to balance a checkbook, let alone pick a stock. “It's Finance 101, but that's what makes it fun,” Zecca says. “You can teach them it the right way and you don't have to break down any misconceptions.”
Barry Klarberg, who works with such stars as 'NSync, says he usually sits down with agents to find out about a client's current projects. Based on that, he'll come up with a budget and asset allocation. “It's much more of an art,” says Klarberg, managing director of Assante Business Management in New York.
Once celebrities have budgets and cash set aside for contingencies, most advisors allocate their assets more or less equally between equities and fixed income products to ensure they have enough money to live on. The mix changes if a player is near the end of his career. Val Chevalier, with Greenberg & Rapp Financial Group in Edison, N.J., says he shifted assets in Mets starting pitcher Al Leiter's portfolio more toward equities. His contract expires at the end of this year and it's uncertain whether he'll sign another. “He may decide to play further,” Chevalier says. “A lot of doors are open for him.”
At Octagon, players who make more than $750,000 will have their money in managed accounts (with such firms as State Street and JP Morgan) and the rest in individual bonds. If the clients are in the higher income tax brackets, Zecca will put them in municipal bonds. Players who make less than $750,000 will have their money split between mutual funds and bonds. Nothing fancy.
Lynn Mathre, president of Asset Management Advisors in Houston, whose clients have included rock stars and major league players, says the hardest aspect of working with celebrities is giving them the attention they demand. “They really aren't on a time schedule except for the one that revolves around them,” she says. “It can end up taking over your life.”
But Klarberg says he treats celebrities like any other clients. Even when he's working with the 20-something year-old members of 'NSync, he considers them businessmen. “You can't look at them any differently,” he says. “I'm happy when they play well, or one of the songs is on the top of the charts. But I have a business to run — for all my clients.”
A Starring Role
Brokers feel the thrill of victory, the agony of defeat.
OK, so they may not look like Tom Cruise. But reps with NFL clients sometimes feel an awful lot like fictional sports agent Jerry Maguire. “You live and die with every play that involves one of your clients,” says Greg Eastman of US Bancorp Piper Jaffray in Phoenix.
Denver-based Prudential rep Ken Ready remembers when one client, linebacker Chad Brown, was carried off the field on a stretcher. “It was one of the toughest things I've been through,” he says.
As soon as the injury occurred, Ready grabbed the phone and called Brown's wife, reminiscent of the scene in Jerry Maguire where Cruise talks with his client's wife after her football-star husband, played by Cuba Gooding Jr., was knocked unconscious in a vicious end zone hit.
Both stories had Hollywood endings.