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At the start of the 2023 Stanley Cup playoffs, Connor Bedard, the 17-year-old junior hockey phenom who is expected to go number one in this year’s NHL Draft, couldn’t help flash a big smile when describing the scene prior to watching Game 2 in Las Vegas. “Everyone had hundreds and hundreds of sticks,” he said with wonder in an interview, as reported in Sportsnet. “And of course you have the lounge area, the chefs, and the cars are pretty nuts.”
Bedard and two other soon-be-drafted players were getting their first taste of major league opulence where players make millions and get treated like royalty. It’s the type of scene that will play out across the MLB, NBA and other pro leagues in the coming months.
With big bank accounts, though, come big responsibilities, including supporting parents, siblings, spouses, children and friends – in addition to the athlete’s own lifestyle now and after their playing days are done.
None of this is easy to manage, which is why young stars need a plan to help them navigate the complexities of wealth. Here are a few things to consider.
Parents and family: The original crew
It’s common for parents to be heavily involved in an athlete’s life early on, says Stephanie Condra, Head of BMO Private Wealth’s National Strategy Office. Klay Thompson is one memorable example. According to NBC Sports, as a 23-year-old rookie in the NBA, the rising star was making US$2.2 million, but only received a $300 weekly “allowance” from his father.
“These parents have been up at four or five in the morning, driving their kids to games,” Condra says. “The parent is key to our relationship, as advisors – many times they’re the decision-maker or a huge influencer.”
Parents and family often have joined the athlete in a new city or country and expect the player to pay for their new living expenses. It can get complicated, which is why many athletes turn to advisors to manage their financial affairs – for themselves and their entourage.
“We often see families which may include mom, dad, siblings, partners and friends moving to a new city together. We want to take care of all of the individuals who are important to the athlete,” says Caroline LeBlanc, an Ultra High Net Worth Banker with BMO Private Wealth who has worked with many sports professionals over the years. “The athlete may also be paying rent, buying cars and paying expenses for the family and friends; hence managing day to day cash flow is important”.
Still, as much as athletes want to share their success, they need to be able to “stand up independently” on financial matters, says Condra. Sometimes that means saying “no” to friends or family, which can be really hard to do, she explains. “We can be the person who says ‘no,’” she says, adding that she’ll even arm athletes with a script when they’re approached for money: Call my advisor, they would be happy to discuss.
LeBlanc adds that this approach can help athletes distance themselves from the pressure of conveying a dificult decision. “We can be the bad guy,” she explains.
Spouses and children: For better or for worse
If there’s one area that can impact an athlete’s wealth, it’s marriage – especially one that ends in divorce. Naturally, prenups, which protect the assets the athlete accumulates over the course of a marriage, make a lot of sense, but it’s not always easy for young professionals to have that discussion with their future spouse.
Other common complexities include children from previous relationships, moving to new jurisdictions with different tax and family laws, custody and residency issues for a professional who travels, and so on.
“As soon as you start to have your own family, you tend to put down roots,” Condra says. “You buy a house, your kids start going to school – and residency starts to get established.”
Financial advisors can help with the financial aspects of the prenup agreements – and connect with lawyers who can work on the legal part. They also have access to tax lawyers and accountants who can set up a future with international flexibility, and have the difficult, but necessary, conversations, including about the potential dissolution of marriage. Jurisdiction will determine many arrangements in case of separation or divorce.
“Now, nobody’s having that conversation with somebody they love,” Condra says. “But it’s the idea of going in aware and knowledgeable, getting advice from professionals, versus being surprised if something were to happen later on.”
‘Chosen’ family: The risks and rewards
Family dynamics aren’t limited to relatives and partners – many athletes bring an entourage of close friends to this intimidating, high-stakes world, too.
For instance, Kevin Garnett, as an 18-year-old drafted from high school, started his NBA career with a large group of friends, all living together. Today, considered one of the greatest power forwards of all time, the young Garnett credited his entourage with keeping him grounded.
That’s not always how the story ends, though. Take Antoine Walker, who, as reported in ESPN, made more than US$110 million over 13 NBA seasons, but declared bankruptcy in 2010. He got caught up in all of the issues advisors warn about: lavish spending on himself, but also on his family and friends. “When I was younger I used to travel with probably eight or nine guys, which is a very expensive lifestyle to live because you are traveling the world,” he said.
There’s also often a desire to keep up with teammates’ lifestyles, and expensive possessions. LeBlanc once got a call from a client at a car dealership: Can I buy this car? He was, of course, looking at the best vehicle on the lot. They discussed his current finances and revisited the athlete’s future financial goals, and he eventually chose a more modest car. “You want to be a sounding board,” LeBlanc says. “The athlete can do anything they’d like with their wealth; however, tying the action back to the financial goal is key.”
Advisors: Your financial family
Ultimately, athletes need a financial team in place to draft detailed plans on how to protect their wealth over the course of their lifetime, safeguard their assets, and find financially viable ways to support the family, friends and causes they care about.
Clearly, athletes have very specific needs, whether its managing cross-border tax issues, complex relationships or ensuring their wealth can last well after their careers end. These aren’t issues players have time to think about themselves. They need to focus on the game.
“There is peace of mind when everything is nailed down,” LeBlanc says. “We have a plan. And that’s at least one thing they don’t have to worry about.”
Great advice helped you succeed as an athlete. It can help you secure your financial future too.
At BMO Wealth Management, we have a team of athlete specialists who understand the challenges you’ll face during all stages of your career and life – from fluctuations in income and unpredictable career spans, to family obligations, privacy issues and transitioning to life after the final whistle. Our professionals help you manage all aspects of your financial future including investment management, banking, trusts, insurance, philanthropy, taxes, cross-border solutions and financial planning.
To learn more about how we work with athletes and coaches or to speak with an experienced BMO Wealth Management advisor, visit https://uswealth.bmo.com/who-we-serve/sports-entertainment-professionals/
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