In Part I, I discussed how a current situation in the NHL demonstrated a larger issue many professional athletes face and introduced three common challenges when it comes to financial security: lack of education, advice and protection. Part I focused on lack of ownership, part II will focus on the lack of qualified advice.
Lack of Advice: The Absence of Qualified Advisors
Trust is one of the primary challenges for professional athletes when it comes to selecting an advisor. As targets for all types of service providers looking to score a high-net-worth client to add to their roster, athletes tend to be overwhelmed with the number of inquiries from these providers.
Since athletes lack the framework to determine which advisor is a better choice and to distinguish who is best equipped to help them succeed, athletes oftentimes turn to those they have known for years, whether family members or trusted friends, to advise them throughout their career. The challenge with this model is that these people are not necessarily qualified to advise on the services needed most by these athletes.
An athlete needs at least one qualified advisor who is independent and objective. In other words, the advisor – whether financial, legal or other – should be able to review and provide advice on the business, financial and lifestyle opportunities presented to the athlete. Ultimately, such an advisor would be able to analyze the opportunities and share independent advice that is not guided by a transaction fee that the advisor would receive based on the decision made by the athlete.
Granted, there are times when the qualified advisor is called upon to comment on an area of expertise outside of the advisor's professional role. This is when the advisor would help the athlete navigate through the issue and question the appropriate experts, as necessary for substantive analysis.
For example, if an attorney was the qualified advisor called upon to help evaluate investment proposals, the attorney is not being asked to give in-depth advice on whether one financial sector is better than another but rather is there to help ask questions, analyze the information provided and educate the athlete on the proposals being presented. There are no financial incentives for the attorney to lead the athlete to select one proposal over the other. The goal is for the attorney to provide independent and objective advice that helps the athlete to make the type of decision that will align with the athlete's overall goals.
Family and trusted friends are still an incredibly important part of the athlete's inner circle and advisory team. Most often, these people know the athlete and his/her goals better than most. However, in order to best serve the athlete, the athlete and his/her team should seek advice from a qualified professional who does not benefit from the transaction itself. Independent and objective advice can prevent poor financial decisions.
Check back on Tuesday for part three of this series that will focus on lack of protection and how the athlete can overcome this final challenge.