Staying Grounded

Flashy cars, expensive homes, and lucrative endorsement deals are the stuff of everyday life for top-tier professional athletes. Children dream of growing up to be like them, fans refer to them as if they’re the best of friends, and to many people they’re role models, for good or ill. Along with instant celebrity, however, young pro athletes often find themselves earning more money than they ever dreamed, and the pressure to maintain a certain lifestyle can outweigh the need to plan for the future.

“These clients have a compressed timeline to accomplish their goals,” says Carolyn Kaufman, president and CEO of Prim Advisors in Cleveland. “You can’t bounce a ball down the court all your life.”

Prim Advisors, a subsidiary of the financial planning firm Prim Capital Corp., is responsible for educating the players on all 30 teams in the National Basketball Association (NBA) on a host of financial issues. “We cover everything on what financial planning will do for you. What to look for in a team of financial advisors, and how to be sure you have checks and balances in place on your advisors,” Kaufman explains.

“At rookie camp, we teach [the new players] how to handle their checkbooks, their paychecks, and how to get on the right track from the beginning.” Kaufman also provides ndividual planning services for a number of NBA athletes.

Professional athletes and personality/sports entertainment clients are different than traditional high-net-worth clients, she says. Planning for professional athletes is a bit different than planning for most other high achievers: The typical retirement age for professional athletes in most sports is closer to 30, for instance, rather than the typical 55 to 65 for other highly paid executives.

“They have to be cognizant of the fact that they may have a lucrative contract at the moment, but one injury could change that,” she adds. Retiring at such a young age, players have to be sure to set aside enough assets to support themselves and their families for another 60 years or more. Additionally, there is the potential for these clients to be taken advantage of by others, or to spend their money early, leaving them with very little on which to live during retirement. Therefore, the planning has to be pretty intense from the start.

Kaufman, a self-proclaimed traditionalist, started her advisory career helping women–primarily teachers and widows–with their planning needs. Even though she now mostly caters to those with net worths of $1 million and up, her firm does not have a minimum account requirement, and she hasn’t fired any of her lower-net-worth clients. “I still help those clients I started with at the beginning of my career,” she says proudly.

Today, including those who are not pro athletes or any other kind of celebrity, she serves about 150 clients. “They are all part of the family,” she adds, “and I really care about what happens to them.”

Pro athletes or not, the largest concern for high-net-worth individuals is maintaining a comfortable lifestyle throughout retirement and ensuring some kind of legacy. Whether it’s taking care of family or establishing a charitable component in their financial plan, Kaufman relieves these concerns by addressing each of her clients’ goals and working them into an overall financial plan. “I look at all the elements in their road map or blueprint,” she says. “Then clients know what they have to do and what priorities have to be established to achieve those goals.”

The New-Client Process

Fee-only Prim Capital currently has about 400 clients, most of which came through referrals.

If someone is referred to her firm as a potential client, Kaufman follows a lengthy screening process to ensure both she and the potential client can create a successful relationship. “They have to be comfortable with us,” she says. “We go through what their needs are and what they want to accomplish. We discuss legalities and the fee schedule.”

More important, she does a risk assessment. “We don’t do exotic things, just basic, comprehensive, integrated planning,” she says. “We don’t have a list of formalized questions to ask,” Kaufman explains. “I have been doing this since 1978 and by this point, it has become second nature.”

Once someone becomes a client, Kaufman begins the data gathering process. “We have an intense, two-hour meeting to get to know the client,” she explains. “That is the most important meeting for me.” Here she discusses risk and reward, timelines, tax sensitivities, and the client’s goals and how to prioritize those goals. “Taxes are just one of the many elements in making a decision,” she says. “We spend time gathering non-quantitative information [as well] and discuss what worked for them in the past.”

In addition to the unique planning needs of professional athletes, their busy travel schedules and public notoriety often make it difficult to dedicate the necessary time to even address their finances. “It’s hard for them to focus during the season,” Kaufman says, but she makes any arrangements necessary to get the job done despite those restrictions.

“The educational presentations we give are during the season and are generally held after practice,” she explains. “The players are required to attend by the NBA players’ union. The union wants to do all it can to make sure that these players have information viable to their needs presented to them in a timely manner.”