Do you even have a plan?
According to Forbes and ESPN, more than half of professional athletes are broke within five years of retirement. As an investment banking group of former major league athletes, we have unique insight into this problem, and we have the ability to solve it. We’ve been down the same road and faced exactly the same challenges. We understand the mindset of a young pro athlete and we understand the lifestyle and culture of professional sports.
Players Capital Group has developed a single source platform to guarantee that an athlete leaves the game in the best possible financial shape he can to begin the next phase of his life. This is a comprehensive risk management program that locks in a player’s future while he still has a chance.
How do these players end up with nothing to show for all their hard work?
Some of them make bad investments. This can happen in several ways. A dishonest financial advisor, business partner or someone in a position of trust abuses that trust and funnels money to themselves. Sometimes that trusted person isn’t dishonest, just incompetent. Sometimes a well thought out business venture suffers through no fault of its own. Sometimes it wasn’t that well thought out. Usually the player invests in someone else’s dream, not his own.
Some of them give it away. The pressure that family members and hangers-on put on an athlete can be hard to resist. The athlete is reminded that he didn’t get there on his own and he owes his success to them.
Some of them have it taken from them. Many athletes lose their fortunes in divorce and family court through alimony and child support.
Some of them fritter it away. Expensive homes, cars and jewelry can deplete funds in a hurry.
Some of them never had a plan for life after the game. When a player retires from the game, his living expenses do not.
Many have multiple aggravating factors.
For an industry that has so much capital and resources there are very little protections or systematic safeguards to ensure an athlete’s post career well being. The leagues and players associations have enacted rules regarding players agents and their conduct, but there has never been a coordinated effort to manage and mitigate the perils faced by a high earning young athlete whose focus needs to be on his performance.
Players Capital Group’s original mission was to provide opportunity to those who retired from pro sports but wanted to make a living in the same high performance culture. We are now expanding into services for present day athletes to allow them to maximize their post career lives.
Step 1: Education, Mentoring and Support
The very first step: The leagues and players associations have tried to help by making basic financial literacy training available. Just because you are literate doesn’t mean you understand Shakespeare. A young man who is scheduled to earn millions of dollars in the next decade needs a much deeper understanding of finance. No athlete should just turn over the financial thinking process to an agent of any kind. He needs to know what he is invested in even if he isn’t making the investments himself. He needs to know the reason for any action taken on his behalf, and he needs to know exactly what his advisors are doing and why.
He’s not going to understand what we’re doing for him if he isn’t highly conversant with the following concepts that go way past mere literacy:
- Supply and Demand
- Risk and Reward
- Creation of Value
- Cash Flow
- Working Capital
- Opportunity Cost
- Transaction Costs
- Time Horizons
- Asset Classes
- Industry Sectors
Something else of paramount importance: Any athlete that is not highly proficient with Microsoft Excel has no chance to understand the ramifications of any financial decision he makes. We stress the importance of learning this invaluable tool.
We introduce and explore these concepts convincingly in a personal manner at seminars led by experienced financial professionals who also played in the major leagues. They have the credibility to talk to a young athlete because they have been there and done that. We create a culture where it’s cool to be well informed. The more you learn, the more you know what you don’t know. The second step is ongoing financial and business training where we encourage a player to be a lifetime learner.
Step 2: The right investments at the right time in the right place
The Forbes article is misleading. Over half of NFL players didn’t play long, didn’t make huge money and it’s no surprise that five years later they had nothing to show for their careers. A year here at league minimum, a year there at a little more, a few taxi squad gigs, a divorce and you’re done. This is the reality for many. At the other end of this spectrum are the stars like Tom Brady and Patrick Mahomes with career earning expectations upwards of $500 million. In the middle are thousands of guys that earn $25, $50 and $100,000,000 more. If your career expectations are $5 million you need to invest much differently than a guy who will make $50 million.
We stress the concept of risk and reward. Money is extremely easy to lose but very hard to recover, and it gets exponentially harder to recover the more you lose. Lose one percent and you only need a 1.01% return to recover. Lose half of it and you need a 100% return. The more you “chase” a financial loss, the more risk you need to take to recover.
We take an incremental approach to investing. In our system the guy with career earnings of $2 million leaves the game owning a decent house outright, a kids college fund, and enough cash to reinvent himself over a couple years. We take the guesswork out of it. The most important lifetime needs are addressed with the earliest money. It’s all about leaving the game with something to build on. These guys are taught to live frugally and forget about competing for style points with more established teammates. When a player commits to our program, we establish a budget and the player lives by it. When he signs a new contract his budget goes up and his lifestyle gets a little better, but most of his money still goes into his investment portfolio.
The guy who makes $5m leaves the game with a nicer house, some income producing rental property, and some annuities that do nothing but grow until they mature at age 50, He drives a slightly nicer car and takes nicer vacations than the $2 million earner but he still lives under a well-ordered budget. He has monthly income from his real estate, but he probably has to work in his thirties and forties.
Guys that make $20m leave the game with the same things, just nicer and more of it. And they have investment income that affords a nice lifestyle before their annuities begin paying them at 50.
When the athlete moves up the spectrum of career earning potential, his lifestyle and discretionary spending level goes up as well, but it never exceeds a prudent number for his circumstances, and he never stops putting away money for his later years. Proper time horizons assure a relative level of comfort instead of a lifetime of hardship and struggle.
The higher the athlete’s career earning path, the more we will diversify his assets and investments. The $50m athlete will have capital available for higher risk enterprises and philanthropy because he assured his future early in the game.
We invest in the appropriate asset classes. There is a balance that must be achieved between risk and reward. A fabulously rich athlete doesn’t need to take any risk, because early on he has enough to live several lifetimes. Someone trying to grow a nest egg to live on two decades later must get a substantial return, but still cannot sustain any losses. How do you get an acceptable return with little to no risk? What do you invest in?
At the lower echelon of career earnings there are only two smart investments:
- Income producing real estate, and long term debt instruments. With real estate we prefer apartment communities and commercial real estate power centers, because they can be managed professionally. They can also be leveraged with low coupon debt. At a 50% LTV, you double the ROI minus the small amount of interest. Class A apartment complexes can easily cost $50,000,000. Only someone making Tom Brady money could own one all by himself. But 25 guys with a million each could own one together in a REIT.
- Annuities are debt instruments issued by insurance companies that build value until maturity, when they begin paying back the debtor on a regular schedule for a specified time period. They don’t pay a huge coupon, but the return is guaranteed and even a modest rate compounds money significantly if it works for you long enough.
Once the athlete has a guaranteed future, he can then diversify. Real estate and debt instruments are still recommended, but now the athlete can take on a bit more risk. Still, we only consider things that have a proven record of success like franchises of successful restaurant brands. Many successful athletes have made a lot of money owning McDonald’s, Burger King, etc. The risk is low. People are not going to stop living in apartments, and they are not going to stop eating. Equity investing (stocks) is also appropriate, but the time horizon still has to be right. Nobody can time the markets, but if you hold a well managed stock portfolio for a long time it has a great chance to appreciate.
What we don’t invest in are startups, restaurants, bars, or anything with even a moderate degree of risk. An athlete cannot afford to lose a dime. He has a decade or so to guarantee that all the hard work, dedication and sacrifice he put in on the way up will last him a lifetime.
Step 3: Mitigation of Risk
Pro athletes have always been targets of predators. We are putting an end to that.
We will protect you from financial sharks. Any asset we put you in will be administered by a company with a national presence and a hard earned reputation to protect. Bank of America, Wells Fargo and Chase would be eligible to hold an athlete’s money, but few others. Only companies like Prudential and Mass Mutual would be eligible to offer us debt securities. Only companies like CB Richard Ellis or Cushman and Wakefield would be eligible to manage properties we own. Only brokerages like TD Ameritrade or Charles Schwab would be eligible to manage stock and bond portfolios on our behalf. In the unlikely event that some rogue employee of theirs defrauded us, these institutions have the power to make it right immediately and they would do it on the spot. Not so with a small time investment advisor, who only needs to get his hooks into one athlete to steal enough money to live like a king for life.
We will protect you from your family, your friends, and your fans. We will supply you with strategies to deflect the friends and family members who will inevitably demand that you support them. Of course you want to and should want to help immediate family members. But just because you made the pros doesn’t mean they all get to retire. You must know what you can afford to do for them and what you can’t. And so must they.
More than half of all pro athletes will be divorced 5 years after their pro career ends. Many women seek relationships with athletes for the sole purpose of being impregnated. Many people unjustly accuse athletes of assault or abuse in hopes of winning a settlement. We will create trusts and legal protections that will afford you as much protection as legally possible in divorce, civil or paternity court. And we will see to it that you are properly insured when you do incur liability by accident or mistake.
We will protect you from yourself. We provide coaching and unique support groups that stoke the desire to be a better man. The best version of any major league athlete doesn’t gamble, doesn’t father children out of wedlock, doesn’t spend frivolously or engage in other forms of self destructive behavior. We have accomplished and successful mentors from both the athletic and business communities and we’ve developed coaching and support programs that encourage the man to live a purpose driven life.
Step 4: Harness our collective power
This program couldn’t be administered by someone that didn’t have vast resources, capital and experience and more importantly it wouldn’t work if they didn’t care deeply about the players’ well being. We have that bandwidth. Not all by ourselves. It takes a village. But we have all the relationships and ability to make this a reality. Former pro athletes in our group are also employed by every one of the nationally recognized firms we mentioned and we will get those services at a very preferential rate.
Players Capital Group is in the business of aggregating supply and demand in the financial and marketing industries, and we do it by cultivating relationships with important and powerful people and companies. We leverage our contacts and influence to deliver unique value to the business world. Individually we are very interesting guys with a lot of great stories to tell, but collectively we have an incredible network that will ultimately make us one of the most powerful groups in the world.