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Financial Planning > Behavioral Finance

Why Pro Athletes Squander Their Money; How Advisors Can Help

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Professional athletes often exhibit the kind of cringe-worthy behavior that resulted in disgraced swimmer Ryan Lochte attaining tabloid notoriety during the Rio Olympics and losing several major sports sponsorships (see 20 Wealthiest US Olympic Athletes in Rio). They are also known for burning through huge sums of money in record time.

Having seen this kind of behavioral pattern often during his career as a professional baseball player, Erik Averill, founder of Athlete Wealth Management in Scottsdale, Arizona, decided that something had to change.

Averill, who pitched in the Detroit Tigers and Seattle Mariners’ farm systems, was convinced of the value of proper financial planning for professional athletes because he believes this demographic is underserved by the financial planning industry.

“There are so many financial advisors in the country and yet very few of them have the expertise to truly understand and relate to athletes,” said Averill, a CFP.

That expertise, he said, comprises a host of factors ranging from working around the irregular schedules athletes keep (“their availability varies on- and off-season and you have to understand that their focus is entirely on their performance”) to proper tax and estate planning expertise, to working with the vast amounts of cash that many athletes make in record time from their salaries as well as sponsorships.

Many athletic fortunes are lost through the combination of uninformed athletes and poor advice from unqualified advisors. Athlete Wealth Management Group’s goal is to ensure these fortunes are not lost through poor financial decisions and poor advice, Averill said, but grow over time to last well beyond an athlete’s professional playing years.

His goal, says Averill, who played at Arizona State, is to change the culture of how athletes use their wealth so they can enjoy a lifetime of success and build a legacy.

“As much as people with very little in resources have limited access to financial advisors, those with lots of money like athletes also lack access to proper financial advisors,” he said. “A lot of mainstream financial advisors tailor their business around people …who want to save enough to retire at 65.”

The average athlete, he continues, does not fit into this category: “Most of them will earn the majority of their money by the time they are 40. They have different risk management issues, there are liability issues they need to be protected from and the way that their money needs to be invested is also different from the mass average American.”

After retiring from professional baseball, Averill worked for Morgan Stanley Smith Barney, where he very quickly realized that the planning models in place would not suit the needs of wealthy athletes.

Determining that a family office model was the best fit, Averill didn’t hesitate to leave his job when he was approached by a boutique financial planning firm that had been set up in the 1970s by another professional baseball player.

“They brought me in to focus on building up the athlete side of the business, and today, we serve 77 professional athletes,” Averill said.

Everyone on his staff, he said, has a thorough understanding of athletes and of the athletic lifestyle.

“We want to help our clients make smart decisions without adding any stress or burden to their time, because they need to focus on what they are doing,” Averill said. “Any advisor serving professional athletes should understand their clients’ mentality and thought process, and how to communicate with them properly. That means not talking down to athletes or talking over their heads, but taking complex financial concepts and putting those into terms that make sense to them. I don’t mean dumbing things down, but really communicating effectively.”

Averill’s brother, Brandon Averill, a CFP at the firm, played in the Houston Astros farm system. And the company’s taxation expert, Robert McConchie, a CPA and PFS, was a four-year letter winner in baseball at Westmont College in Santa Barbara, California, which has produced many pro baseball players over the years.

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