Most advisors don't see all that many clients who are in their 20s and even fewer young men of that age with millions of dollars to invest. Most advisors also can't expect to see such high-earning young folks who only expect another ten years of plying their chosen career, if they're lucky. But then again, unlike Jim Huller, most advisors haven't targeted National Football League players as their preferred client base, nor do they have one of the most successful sports agents in the business as a partner.
Located in Roanoake, Indiana, Huller launched Maximum Wealth Management last May in partnership with Eugene Parker and Roosevelt Barnes, the principals behind Maximum Sports Management, which boasts a roster of more than 40 current and former NFL players. While not home to an NFL franchise, Roanoake is just outside Ft. Wayne, Indiana, and within driving distance of a number of cities--Indianapolis, Chicago, Detroit, Cincinnati, and Cleveland. Maximum Sports Management's clients include such marquee names as Emmett Smith, Deion Sanders, Rod Woodson, Derrick Brooks, and Curtis Martin. Just as Huller's client base is slightly unconventional, so was his introduction to the advisory profession.
Stepping Up To The Line
As a young adult, Huller had been simultaneously working in his family's refuse business and working on his bachelor's degree in business at Purdue University. Then in 1997, right around the time he graduated, the family sold the business to Republic Waste Industries, a growing conglomerate that under the name Republic Services Group (RSG) is now the nation's third largest waste management firm. "If we would have been paid in cash, I never would have gotten into this business," recalls Huller, "but we were paid in stock."
Like many people who suddenly find themselves wealthy, Huller's family took their assets to a major wirehouse but soon became disenchanted. "We had an advisor who didn't have a strategy or a plan," he explains. Huller quickly found himself scrambling to learn about the stock market and how to move the family's wealth from a single asset into a diversified portfolio. "I was sort of forced into it. We needed to get some advice and we weren't getting it. The luxury I had was that I had the time to figure it out. I read everything that I could. I had a little bit of a business background, but it's a very different beast than what you're taught in school."
As he learned more about the markets, Huller started giving tips to his father-in-law, who suggested that he ought to manage money for a living. When Huller's oldest child reached school age, it was time to go back to work and he took a job with Merrill Lynch. His father-in-law became his first big client.
Starting out, Huller looked for a group of clients that he would be able to relate to and to whom he felt he could bring a lot of benefit. "The younger person that all of a sudden has a lot of money was who I saw myself being able to help the most," he recalls of his decision to go after young athletes. "The difference between them and me is that I had the time to figure it out. They've got to make the team, they've got to travel a lot, and they don't have the time for that. That's where all our clients fit in, they either don't have the time or they don't have the expertise, or a little of both."
As he began investigating his target niche, Huller found that getting access to these potential clients was bit harder than he anticipated. Young athletes with multimillion dollar contracts have huge targets on their backs, plenty of people who want to "help them" with their newfound fortunes, and they tend to be wary of strangers. He also found that it's not an area that an independent advisor can just break into. "You can't cold call them, because they won't answer a call from a number they don't recognize," he says. "If you're going to do this you need some kind of an affiliation or an alliance with an agent."
Huller had known successful sports agent Eugene Parker for a number of years before he got into the financial services industry, but by then, Parker had sold the ownership of his firm to Loring Ward International and was referring his NFL clients to their advisors and money managers. By the beginning of 2005, however, Parker and Roosevelt Barnes had bought back Maximum Sports Management and sat down with Huller to plot out the business plan for Maximum Wealth Advisors.
The major focus for Huller will be new clients signed by Maximum Sports Management since most of their veteran players already have advisors and are probably comfortable with the investment strategies they've been following. As he explains it, Maximum Wealth Management helps provide a "value-added" bonus for young players new to the league and flush from their first contracts and signing bonuses, so at this point all of Huller's athlete clients are also clients of Maximum Sports Management, but not all Maximum Sports' clients are also his.
In addition to Maximum Sports' new signings, which are four or five players coming out of college each year, Huller also has about two dozen clients that he had been working with prior to launching the current venture. "Maximum Wealth Advisors is not strictly an athlete's money management firm, although it was conceived as a firm to serve athletes," he points out. "We've found that there are other people who find out what you do and they want to be part of it too."
Going forward, Huller and Parker have discussed making the services of Maximum Wealth Advisors available to other sports agents who haven't yet formed any such alliances and want to be able to offer financial management and advisory services to their clients. "Most agents work out of their homes. They're stand-alone. Eugene and Rosie, they have all the players they can handle right now, but I can handle more than they can. Maximum Wealth will be available to other agents. Maximum Sports deals with football players, primarily, but Maximum Wealth Advisors, it doesn't matter if it's basketball or if it's baseball. We'll basically manage the money the same way."
There's a difference between managing money for people who had very little and suddenly have a lot, like lottery winners, or in this case top draft-pick rookie athletes, and those who either grew up wealthy or who earned their money over the course of a long career. What Huller as an advisor and Barnes as an agent do is try and help their young clients make the most out of the money they have right now. They are well aware that there are very few guarantees in life and virtually none for young players in the NFL.
"It's a little bit different with football players than it is with basketball or baseball, because those guys tend to have more guaranteed money," explains Huller. "With the NFL guys it's not as guaranteed, so you have to treat whatever money you have right now as if it's the only money you're ever going to get. There could be an injury and that's the end of it. You've got to be a little more conservative with the football players because the average guy gets one contract and that's it."
That last point is probably a little shocking to NFL fans, but according to Huller, the average player in the NFL has only a 3.5 year career and most never make it to the end of their first contracts. With that in mind, Huller aims to do as much as he can with the player's three primary sources of income. The first is a signing bonus, which for a top draft pick can be significant. Then there's also their annual salary and whatever endorsement deals the agent can wrangle. When Maximum Sports client Larry Fitzgerald signed with the Arizona Cardinals as the number three pick overall in the 2004 draft, his base salary for that year was over $1 million and his signing bonus was $7.5 million. Last year, Maximum's top client was Cedric Benson (#4 overall draft pick) who signed with the Chicago Bears for a base salary of only $230,000, but also got a $4 million signing bonus and $1.4 million in other bonuses by the end of the season.
Not surprisingly, the first things most of these newly flush athletes look to purchase are a house and a car, which will typically come out of the signing bonus. As Huller attempts to make clear to his clients, the more money they spend now, the less they are going to have to put to work to support them in their post-playing days. But that point isn't always grasped by a 21 year-old who's seen one too many episodes of MTV's "Cribs," and is looking at an eight-digit paycheck with the idea that the money will last forever.
"Controlling spending is probably the biggest challenge," says Huller. "If he's got $10 million, the first thing a guy will say is, 'I can just live off the interest for the rest of my life.' It's a nice thought, but no, you can't."
Huller's goal is to provide his clients with a portfolio that will continue to provide income even if the player's career is cut short due to injury. "If we can get them to live off their net worth and they get hurt, then they're fine," he says. "Their standard of living doesn't change at all." "My goal is for them to put as much money as possible into the account with me so that I can use it to do the most for them, but we tend to come at it a little differently than most firms," he says. "What we do is take a client's assets and we distribute 5% of that back to him spread out over a year. So what that means is that if a guy brings me $10 million, then we're going to give him $500,000, but it will be spread out over 12 months. That's what he lives on. We send him a physical, hard check each month. We could have it wired into a checking account, but we don't because we want him to see it. It makes it real. They know what they're living on, but we don't put them on a budget. That's kind of our budget, but we found out that budgets don't work. And they know that if they spend more than that, if they have to take it out of their account, then it's going to reduce their payout. They know, 'This is what I have to live on.'"
Huller's compensation comes from asset management fees, which run from 1% to 1.25 of the account's total.
Throwing the Penalty Flag
As Huller discovered early on, controlling their own spending isn't the only problem for these young millionaires. There are often hangers on and looking for a handout. In those cases, Huller points out to the client that any money given to those people now will affect the player's payout over the long term. Many athletes who have received special treatment from an early age because of their physical abilities aren't used to having someone lay it out straight for them, but Huller says he's not afraid to tell it like it is.
"I'm not worried about losing a client because I'm set financially," he says. "I've gone through what these guys have gone through financially, though not the sports side. He could have gone to any bank or brokerage and they would have jumped on it. What I bring to the table is that I'm willing to tell them what they need to hear, not what they want to hear, and whatever I tell them, I'm acting as a fiduciary."
To further prepare their athlete clients for the future, Maximum Sports Management is planning to offer some additional services. One will be a commercial real estate venture that will provide another area of diversification for player's assets. The other will be to help set them up for a life off the playing field. "If you talk to any of the guys before they come into the league, they'll tell you, 'When I retire, I want to own a business.' So what we're putting together is a division of Maximum that will buy the company that they want and run it for them while they're playing. If they want, they'll be able to hire their friends or relatives that need money, and that's a better way of helping people that have been there for you all your life."
The Investment Game Plan
When it comes to investment strategies, Huller's approach is like Henry Ford's with the Model T (it came in any color you wanted, as long as the color was black). Huller practices what he preaches and makes the same investments for his clients as he makes for himself. He likens it to the difference between flying on a plane with the pilot on board or remotely controlling the flight from the ground. "If I'm buying something for my account, I'm buying it for everybody's account," he says. "I'm in it with them. I want to make money and they understand that. They know I don't want to lose money and so the trust thing is that I'm in the same thing with them."
Huller, with a laugh, refers to himself as "a reformed strategic allocator" and looks all over the investment landscape for opportunities. "I tend to go anywhere," he says, using his current position in gold as an example. "From me they'll get exposure to stocks, bonds, commodities, and cash."
While at one time he looked at individual equities and securities to provide exposure to those segments, he's shifted over time. "I was getting more into mutual funds, but this year most of my new money has gone into ETFs and that is becoming my weapon of choice."
He tends to avoid a lot of the usual alternative investments such as REITs and hedge funds. "I don't really do that because my problem with those is liquidity. Our guys are young, so we need that flexibility if something comes up out of the blue. That might be something we would look at later in their lives." As his athlete clients age, Huller also plans to address estate planning and other aspects of lifetime financial management.
To keep his one-advisor practice going smoothly, Huller relies on administrative staff that he shares with Maximum Sports Management and on Schwab Institutional to custody his client's assets and provide back-office support. With his one-portfolio-for-everybody investment approach, Huller expects to be able to continue growing his practice without any strains over the next few years. It's a strategy that's been a winning game plan so far.
Managing Editor Robert F. Keane, a lifelong NY Giants fan, can be reached at email@example.com.
Maximum Wealth Advisors Advisory
196 N. Main Street
Roanoake, Indiana 46738
Year practice began: 2005
Number of advisor in firm: 1
Compensation method: fee-only
Fee for managing assets: 1% to 1.25% of AUM
AUM: $100 million (approx.)
Designation: Accredited Investment Fiduciary
Registrations and Affiliations: RIA, Series 66, NFL Players Association Registered Player Financial Advisor, member FPA
Clientele: NFL players, business owners, retired business owners
Education: BS, Purdue University School of Business
Previous incarnations: worked in family-owned waste management company; Merrill Lynch
Jim Huller says he's come across more horror stories about athletes being taken advantage of than he'd care to recall, most from before he started Maximum Wealth Advisors. The following one is more recent and shows what easy prey an ignorant young millionaire can be.
"I got a call from another agent who had a player who last year was a rookie and the advisor he had took all of his signing bonus and put it into a variable annuity," says Huller with disgust. "Of course, the player at the end of the season doesn't have any money because he's spent it all and so he's got to break into the annuity. He's got to pay penalties, he's got to pay back-end charges and you can't borrow against it. The advisor, I'm sure he was thinking, 'I can get 6%, this huge commission' and I'm sure he only told him the positives--it will defer taxes, etc.--he didn't care about what happens if the guy needs money. I told him your choice is basically to bust it and pay the back end, pay the taxes, pay the penalty, and try to do better next season. That's an example of what can happen. These kids just don't know. It's not just NFL guys, it's the general public. They're not that well-educated about investing; we don't teach this in schools."