Hall of Fame, How to Manage Financial Success as a Professional Athlete asks some big questions: How do you preserve your fi nancial security? How do you handle the onslaught of requests for money from family and friends? How do you intend to leave a legacy? How can you put together a team of advisors you can trust to oversee and manage your fi nancial security? My friend and the book's author Ben Renzo answers all those big questions. You'll look at your money, business opportunities and your legacy diff erently after you read this indispensible book. Tony Boselli, a four-time AP All Pro, fi ve time NFL Pro Bowl selection, twice named NFL Lineman of the Year, was named to the All NFL Team in 1997, 1998, and 1999 and was named to the All-Decade Team of the 90's. The best thing a young professional athlete can do is listen to an expert and learn from the mistakes of existing and former professional athletes. Ben Renzo is an expert on managing risk and his book Hall of Fame is a treasure chest of practical information and insight. For professional athletes who want to protect their money, preserve their wealth, walk their faith and extend their legacy far into the future, this is the book for you. Derrick Brooks, an eleven-time NFL Pro Bowl selection and nine-time AP All-Pro, Brooks was named AP NFL Defensive Player of the Year in 2002. He earned a Super Bowl ring with the Buccaneers in Super Bowl XXXVII and was named to the All-Decade Team of the 2000's. Ben Renzo stands out as an expert who will help a young professional athlete manage financial success. Hall of Fame, How to Manage Financial Success as a Professional Athlete is his calling card. Short, tight and to the point and written in plain English, it draws on the life lessons of professional athletes. It should be required reading for every athlete who has turned professional or expects to. Read the book, distill its lessons, follow its advice and make sure
Hall of Fame
How to Manage Financial Success as a Professional AthleteBy Benjamin F. Renzo iUniverse, Inc.
Copyright © 2009 Benjamin F. Renzo, JD
All right reserved.ISBN: 978-1-4401-9133-6Contents
Forward....................................................................viiChapter 1 How to Blend Fame and Money with Family..........................1Chapter 2 Consider the Value of Spirituality...............................17Chapter 3 Build a Winning Team of Advisors.................................31Chapter 4 Use Wealth Planning to Secure Your Future........................55Chapter 5 Identify the Risks in Business Opportunities.....................79Chapter 6 Acquire a Passion for Charity....................................95Afterword..................................................................103Endnotes...................................................................107Additional Resources.......................................................111
Chapter One
How to Blend Fame and Money with Family
An athlete's financial success can have a substantial effect on his or her family members, presenting opportunities for parents, spouses, children, siblings, and other relatives to better themselves and have a positive effect on their communities. For the athlete, achieving that end requires not only careful wealth management and estate planning, but also relationship management when it comes to family members and close friends. Careful management will stabilize those personal relationships, insulate them from the effects of money and fame, and mitigate any risks that could threaten financial security.
"I think athletes need to understand that their relationships are going to change with every individual, including their parents, first and foremost, all the way down to that seventh cousin you never met," Former Tampa Bay linebacker Derrick Brooks says. "If you expect change, change shouldn't be that big of a surprise."
Families are an invaluable source of love, support, and encouragement throughout life's many joys, triumphs, challenges, and heartaches. Unfortunately, families can also be a source of sadness, anger, or disappointment. Regardless of your past family experience, you can be assured that-for athletes on the brink of fame and fortune-families, if not managed correctly, can present roadblocks to one of life's biggest journeys and, in certain circumstances, jeopardize an athlete's financial security.
Each of us faces a broad range of struggles during the various chapters of our lives. These struggles are enhanced when you are in your early twenties and coming into millions of dollars. Money becomes the focal point of many family issues for athletes, and these issues are exacerbated by the constant threat that the money might be gone tomorrow. The entire family must determine how it can continue to relate and function in a positive way that is independent of the athlete's financial success on or off the field.
Family relationships present some of the most difficult challenges I face as an advisor for young athletes during their transitions from amateur to professional sports. My clients have been raised in a variety of family settings. Some grew up in families that have been overly involved in their careers and believe they have a significant stake in their success. The majority of my clients, however, grew up in single-parent households or with separated parents. Unfortunately, it is often easier for advisors to gain the trust and commitment of athletes and their families in the absence of a strong family support system. Without a strong and healthy support system, certain athletes are more likely to make rushed, uninformed decisions while putting their faith in people who will not keep their best interests in mind. Because of this, I stress the importance of checking the background and credentials of any potential advisors.
On the other hand, a strong family support system can also backfire and cause more harm than good when the expectations for an athlete are so high that the pressure of failure becomes too great. When this happens, the joy of competing no longer exists, and this can lead to resentment against those who love and support an athlete's success to a fault. Some families unknowingly force unhealthy expectations upon an athlete to the point that the athlete's entire identity within the family revolves around his potential ability to make a lot of money. Some family members, often unintentionally, hang their hopes on the athlete's future success, dreaming about what life will be like in five years when he's making $10 million a year-or so they hope.
For moms, dads, aunts, or uncles who spent their entire lives working tirelessly to provide a better life for an athlete, this success might equate to a new car, a new house, and a new lifestyle. Some may see the athlete's success as an opportunity for them to forget about their own failures in the past, or it may provide them a second chance to pursue a productive and meaningful life.
Suddenly, that family member is equally vested in the professional success of the athlete, putting pressure on him that is both subtle and powerful. Some athletes acknowledge that pressure and manage it constructively. For others, it becomes a burden that instigates family conflicts down the road. Regardless of their family background, young athletes come with diverse family problems and issues that must be dealt with up front in order to avoid misunderstandings, false expectations, or bad habits. The rules provided below will help athletes navigate potential problems and avert hard feelings.
Rule 1: Give back to your family, but set boundaries.
Upon signing their first pro contracts, many rookie athletes set out on their career paths with the intention of sharing their newfound wealth with family members. They feel an obligation to share their financial successes with loved ones and give back to those who provided love, support, and encouragement over the years. As an advisor, I support that objective, but I encourage clients to give back in a way that is constructive and emphasizes personal responsibility.
If there are certain occasions or situations where your family needs financial support, it is essential that you develop a carefully laid out plan that details how your support will be structured. Handing a blank check over to your parents or other family members once a month can bring unhealthy expectations, leading them to believe you will always be there for a handout. "If you lack a detailed plan and hand over sums of cash every month with no rules attached," Brooks says, "Family members will turn your financial gift into a weapon rather than an asset."
Family members must understand the same reality that you have or will come to understand: your playing days are limited, as is your multimillion-dollar team salary. The money you earn as a professional athlete should last for decades, or perhaps for generations, with the help of a well-managed wealth plan and asset preservation strategy. Allowing your family to participate in your earnings without setting boundaries may severely jeopardize your long-term financial goals and alter your relationship with your family.
For Brooks, the guiding force in the early months and years of his career was fear-fear that he would somehow lose the money he had earned. Though he desperately wanted to provide his parents with financial assistance, fear made him extremely cautious about how he distributed his income.
Brooks explains that there was a period when he and his mother were not on speaking terms because she believed she deserved more money than he was allocating. "I had not reneged on giving her x-amount of dollars," he says. "I honored what I promised, so she needed to honor her promise by saving more money." The amount of money he was allocating to his mother was based on his desire to continue to provide for her even after his retirement. That would not be possible if he were allocating the amount she believed was appropriate.
She was unaware of the big picture concerning taxes, fees, and other line items that cut significantly into her son's earnings. Open and honest communication allowed her to realize that his take-home pay wasn't what she had assumed it to be.
There are many assumptions about how much money athletes actually take home. Yes, many contracts pay significant income. However, after agent commissions and taxes, the take-home pay is a lot less than what the media portrays. You still may not sympathize with the NFL player that receives a $3-million paycheck and ends up taking home just over half that sum after federal taxes, state taxes (depending on residency), FICA, Medicare taxes, and agent fees. The point is that your family needs to understand your plan, savings goals, and responsibilities in order for you to avoid misunderstandings and false expectations regarding your actual financial situation.
It is vital that your plan, like Brooks's plan, is structured based on your needs, not the needs of your family members. Communicate to your family your desire to help them, but also convey your personal financial goals and how your contributions affect your long-term goals.
As a child growing up in Illinois, Eric Steinbach was aware that his parents made financial sacrifices in order to send him and his siblings to Catholic school. When the offensive guard graduated from the University of Iowa in 2003 and was drafted by the Cincinnati Bengals, he decided to repay his parents for some of those sacrifices.
Some athletes assist parents with a specific purchase-Brooks bought his parents a new car-or they give them a prearranged amount of money each month. Others provide assistance through job opportunities. You may decide to appoint your sister to head your private foundation, for example, or hire your best friend to work at a new business you start. I will discuss the value of these options in later chapters.
One plan I have seen athletes use successfully is giving family members prepaid debit cards. The benefit is that a monthly statement is provided with details of where, when, and how much the family members spent. This information shows whether the family members are using the money for intended purposes, so it allows you to make sure the financial help you provide is productive and respected. If the family member is spending the money on pricey jewelry and luxury vacations rather than using it to pay down debts or to fund living expenses, you and your advisors will have the means to reevaluate the arrangement and hold family members accountable.
As an athlete, you must assert yourself in these relationships, not by coming across as a dictator, but as someone in control of the situation. When you have millions of dollars in your pocket, people can easily take advantage of you if you fail to establish boundaries in your personal relationships. But when you're in your late teens or early twenties, establishing boundaries with your family is hardly an easy task. In many instances, an athlete must assert himself as the primary decision maker concerning issues related to his career, taking that responsibility out of the hands of his family.
Regardless of the system you implement, be mindful of the fact that family members are not entitled to your money, though they may act as if they believe otherwise. Assert yourself as the key decision maker and let family members know you're in control. Then they can't take advantage of you. This role reversal may be hard, and for many people, it occurs later in life. However, most athletes are forced to deal with this situation earlier due to the circumstances.
Steinbach's agent, Jack Bechta, warned him about the risks of opening his wallet to his family, saying, "If you're a crutch now for your family, you'll always be a crutch." With that in mind, Steinbach has been somewhat stern in controlling how his money is distributed, and his parents and siblings have respected his decisions.
By now, you may be wondering why I'm lingering on this topic. It's simply because money can bring out the worst in people, and you need to be prepared if that happens in your family. I've seen it happen, and the extent to which it occurs in the world of professional sports is in a class all its own. Rather than being grateful for the generosity bestowed upon them, sometimes family members begin to see the athlete in the family as an ATM and act as though they are entitled to a portion of his earnings.
Some of my clients have arranged to deposit a predetermined amount of money in their parents' bank accounts on a routine basis. Most parents are grateful for what truly is a gift, but I've overheard arguments about money between athletes and their parents-the deposit wasn't made on time, for example. Can you imagine what that sort of screaming match could do to you if it happened the night before a game when you need to focus on your performance and mentally prepare for competition? That type of argument does nothing but provide an unnecessary distraction.
So what can you do? The problem is compounded if the athlete gives in to his parents' demands and makes a deposit into their bank account the next morning. He sets a dangerous precedent, showing that others can take control of the situation through manipulation. It would be much better to refuse to let family members stir those types of emotions.
Better yet, sit down and engage your family members in a candid discussion about money and each others' expectations before they try to start that argument. Listen to their expectations, but also impress upon them that they cannot call and ask for money during the season unless it's an emergency. If it is an emergency, it is imperative to involve your advisors, too, so they can help you sort through the financial, tax, and legal implications. This will help remove the emotional side of the situation and allow you to focus on your job.
You may ask why your advisors need to be involved. How could there be legal, tax, or financial issues? A real-life example will help you understand the answer. Last fall, a client called and mentioned that he wanted to pay off his parents' $200,000 home mortgage to help relieve some financial burdens. Most athletes simply write a check to the lender or their parents to pay off the mortgage. However, a knowledgeable athlete will first call his attorney or CPA. Why? Because there are tax and legal issues involved in this type of transaction.
First, the $200,000 check was subject to gift tax in 2008 of 45 percent unless my client elected to use his lifetime gift exemption of $1 million. I didn't recommend using his lifetime exemption because that $1 million needed to be preserved for estate planning purposes. Instead, I advised my client to structure a loan to his parents for $200,000 with deferred repayment terms, which he could forgive over time or collect in small pieces, in order to avoid the tax. This simple advice saved my client tens of thousands of dollars in gift tax.
If you find yourself in a similar situation, you need to consult with a CPA and have an attorney draft the note. Once the deal has been handled by the CPA and the attorney, an investment advisor can designate the account from which the funds will be withdrawn to preserve the integrity of your investments.
My clients understand that, sometimes, part of my job is to come across as the bad guy. I sit in living rooms and engage athletes' parents in conversations about how money will be appropriated. That doesn't bother me. It doesn't matter that the message is coming from me, so long as it is being communicated.
In laying a set of ground rules, keep in mind that your lifestyle should mirror your message of financial responsibility. It may be difficult for your family members to respect your ground rules if you're driving a Lamborghini, living in a fifteen-thousand-square-foot house, and partying in swanky clubs five nights a week. If you lead by example, they will be more likely to respect your financial decisions, and you will lessen any strain caused by sudden wealth.
The above ideas are always a work in process. In the beginning, don't expect to figure out every single detail. Financial success can serve to help your family in ways no one would ever expect. There is nothing better than having the resources to financially take care of your family in a responsible manner. Having a thoughtful financial plan that is communicated properly to your family will help avoid conflict while allowing you to celebrate and share your financial success with family members in a constructive way.
Rule 2: Beware of the long-lost cousin.
Athletes on the verge of professional success must also face the reality that ex-girlfriends, estranged parents, long-lost cousins, childhood friends, and countless other people from the past will often come out of the woodwork.
(Continues...)
Excerpted from Hall of Fameby Benjamin F. Renzo Copyright © 2009 by Benjamin F. Renzo, JD. Excerpted by permission.
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