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Portfolio > Portfolio Construction

Staying Grounded

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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.”

Beyond those presentations, Kaufman will meet with individual players in their homes or in a private location. “I think it’s easier for everyone and it provides an atmosphere in which they can focus on their concerns and needs,” she explains. During away games, Kaufman will meet with clients in the hotel where the team is staying. “But the comfort and the privacy of their own home works better than any other option, in my experience,” she says.

One of the most important issues Kaufman is sure to discuss with players–whether or not they eventually become personal clients of hers–is the possibility of financial advisors taking advantage of them. “We stress having checks and balances in place for their team of advisors,” she says. “The first thing I tell them is to find competent, helpful advisors to work with, but to be sure they are monitored and are working to accomplish their goals.” The second point, she says, is to be sure that not just one person is handling everything.

Outsourcing Money Management

Though Kaufman meets with her clients herself, her firm outsources all of its investment research and management to private money managers, selecting managers based on clients’ risk profiles, the amount of money they have to invest, what they want to accomplish, and when they want to accomplish those goals. These managers will set up the portfolio and trade that portfolio within the guidelines of the investment policy statement made with the client, Kaufman explains. “We don’t always use the same person or firm to manage each portfolio.”

The money manager is the one who is actively engaged in making buys and sells for the portfolio. The portfolio analysis and fund analysis are done quarterly, but the actual portfolio management is an ongoing process. “Our firm sits down and reviews [the quarterly statement] with the client to be sure that they are comfortable, that they understand what is happening, and that they are pleased with the performance of the portfolio compared with the benchmarks.”

For smaller clients, however, Kaufman does mutual fund investing and establishes a portfolio based on asset models. Prim’s team includes a CFA that sets up and monitors these portfolios. These smaller client portfolios are between $250,000 and $1 million, and are either those Kaufman has worked with since the beginning of her career, or are family members of some of the larger clients. “Part of a family office structure is making sure that the entire family is consistent in what they are trying to accomplish,” she says. “We help them with a plan and do some investment advice to get them on the right track.”

Road Games

It’s not uncommon for many advisors to travel to meet with clients, but Kaufman’s schedule is a bit more hectic than most in her field. “I don’t have a typical work week,” she says. “I try to work at home on Fridays to get my paperwork done because Monday through Thursday I am seeing clients, following up, answering questions, and checking in with the rest of the team of advisors.”

Scheduling appointments with NBA clients is often difficult because of their travel schedules, she says, so each week is generally dependent on those schedules.

In addition, Kaufman is involved with a number of professional organizations and is on a plane at least once a week handling one of her many board of directors positions.

“I think it is important for me to pay my dues continually,” she says. She sits on a church board, is a trustee for a university, and is involved in a program to help children with physical disabilities. “I am trying to do community, church, and charitable activities as part of giving back.”

Though Kaufman is 63, she has no intention of retiring in the next 10 years. “I love what I do and I want to continue to help clients solve their problems in the best possible way for the indefinite future,” she says. “The firm will continue to grow and evolve, but I don’t see much of a change as far as the structure is concerned.”

The best part of her job, she says, is that her clients have truly become part of her family.

“I go to their weddings, their christenings, their wakes, and their open houses,” she says. Not a month goes by that she isn’t invited to some client event, Kaufman notes. Far from considering it a chore, however, “It’s a joy to do these things.”

Megan L. Fowler is a freelance business journalist in Fairbanks, Alaska. She can be reached at [email protected].


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