Wednesday, April 24, 2019
The news is littered with professional sports stars earning millions and millions of dollars on contracts and endorsements and then for everything to come crushing back down on them. Once their personal fortunes are exhausted it is nearly impossible to recuperate what they once had, or even to be back on sturdy ground.
The reasons these superstars' wealth goes up in smoke can be devolved into three reasons: overspending, unsound financial advice, and a mixture of both. Overspending is not usually the sole reason that these athletes lose so much money, but it is definitely an attributing factor. Bad or deceptive financial advice can easily be determined to be the overwhelming reason why the fortunes are lost, and sometimes the flimsy advice is unintentional. But as Evan Jehle, partner in FFO Business Management & Family Office explains, “There are also quite a few professionals who exploit the naiveté and unsophistication of successful athletes. In these scenarios, the advice that has been given was done to benefit the advisor rather than the athlete.” Astronomically high life insurance policies with premiums that provide substantial commissions to advisors is one example.
Unbridled expenditures in combination with unsound financial advice can eat away at a professional athlete's fortunes, and in many cases, completely eradicate them.
See Russ Alan Prince, Russ Prince: How Pro Athletes Can End Up Losing Their Wealth, Financial Advisor, April 10, 2019.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.