Then-New York Yankees player Juan Soto during the sixth inning of a game against the Seattle Mariners at Yankee Stadium in the Bronx, New York City on May 22, 2024.
Sarah Steele | Getty Images Sports | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for high-net-worth investors and consumers. Sign up To receive future editions delivered directly to your inbox.
Skyrocketing salaries for top athletes and lucrative profits for college athletes have sparked a new gold rush among wealth management firms.
Juan Soto’s $765 million contract with Major League Baseball’s New York Mets highlights the unprecedented wealth created by professional athletes and the opportunities it presents for the wealth management firms that manage their investments. With college athletes now earning six to seven figures for their name, image and likeness, and the rise of women’s sports, the population and wealth of professional athletes has made sports a key driver of wealth management growth.
“The numbers have skyrocketed,” said Molly Crowder, financial advisor and director of sports and entertainment at Morgan Stanley. “There is so much money now that there wasn’t 10 years ago. Being part of that growth makes our job becomes more complex and exciting.”
From long-term leaders in the field, e.g. Morgan StanleyBernstein, UBS and Goldman SachsFrom multi-family offices including Rockefeller Capital Management to even private equity firms, wealth managers are expanding their sports and entertainment footprints and hiring former athletes to recruit more clients.
James Beale, a former hockey player, is director of development at Rockefeller Global Family Office at Rockefeller Capital Management, where he oversees the sports and entertainment division. Bill said that while athletes are no different than other high-net-worth clients, having the experience of a former athlete can help.
“I’ve seen a lot of my friends[in sports]who maybe didn’t spend enough time looking at their wealth. That got them into trouble. So understand that and try to help people avoid having those problems in the early stages of their lives. My professional career has put me in a good position throughout the athlete network,” Beal said.
Bill said that similar to other high-net-worth clients, athletes tend to spend most of their time on their business or career, leaving little room for investment.
“They spend 99 percent of their time taking care of their bodies, managing their health and training,” Beal said. “It’s very similar to entrepreneurs focusing all their time on their business. We serve as a trusted partner to help them manage their finances and give them time to focus on their craft.”
However, other advisers to wealthy athletes say they face unique challenges. Unlike most wealth creators who build their fortunes as they age, athletes receive their biggest windfalls when they are young. As a twenty-something, and increasingly a teenager, dealing with the affairs of millions of people comes with special risks.
“The money they made when they were younger,” said Stacie Jacobsen, national director of client engagement and co-head of the sports, media and entertainment group at Bernstein Private Wealth Management. More than they will ever earn in their lifetime. “Their relationship with money is almost unique to almost everyone else we work with. “
Given their relative youth, education is key in advising professional athletes. Jacobson said athletes are used to projecting confidence, so they are often reluctant to ask questions about investments.
“There was a sense of, ‘Yeah, I get it,'” she said. “Behind the scenes, they really don’t know. So I have to be honest and say, ‘Do you have any other questions about these areas?’ or ‘Do you want to delve deeper into this?’
Professional athletes’ age and excessive focus on their careers make them easy targets for scams, scams, and bad investments. MLB phenom Shohei Ohtani discovered that $16 million disappeared from his account. His translator later admitted to stealing funds from Ohtani’s account to cover gambling losses.
A 2021 Ernst & Young report found that professional athletes lost nearly $600 million to fraud between 2004 and 2019.
Taxes are another major challenge facing professional athletes. So-called athlete taxes, which athletes often pay to the states where they compete or earn income, can be complicated and time-consuming to calculate. Wealth advisors say they work with athletes to keep detailed records and plan the best tax residence.
Advisors say their biggest job working with professional athletes is helping them say “no.” Whether it’s a friend or family member pitching them an investment or an impulse purchase of a $400,000 Lambo or an $800,000 Richard Mille watch, young athletes are prone to making costly decisions .
“If one of my clients came to me and said, ‘I want to buy this car,’ and it wasn’t in our original financial plan, I would say, ‘Not yet,'” Jacobson said. “Or I would say, ‘Okay, but here’s the impact of this purchase on your financial plan, and it may take longer to achieve the priorities you originally set.'”
When clients come to her with investments recommended by friends or family, Jacobson helps them get more information about the business and conduct proper due diligence. The same goes for real estate.
“If a client says, ‘I want to buy this house I just saw,’ I say, ‘Why? Is it worth the money? Who will use it? What is the long-term investment strategy?'” she said.
While professional athletes used to become partners in restaurants, car dealerships and other consumer-facing businesses that benefited from their image, today’s young athletes want equity stakes in fast-growing technology companies with board seats. Cryptocurrencies and artificial intelligence are also popular, consultants say.
Ultimately, being a wealth advisor to professional athletes is about preparing them for life after competition. Many careers are short and unpredictable, especially in the National Football League. Advisors say they have to be their clients’ biggest cheerleaders as they play ball, but also plan for the inevitable.
This includes everything from investment planning to building a second career to negotiating long-term brand deals and income-generating assets.
“They realize this is probably their best opportunity to create a lot of wealth,” Jacobson said. “They’re taking this seriously, putting together a team of professionals and starting to get involved and ask the right questions.”
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