Chapter 9: What is an Advisor
Learn how advisors can help and hurt your career.
Advisors: Who Are They And What Do They Do?
“His Klutch Sports Group is taking on the Ivy League-educated lawyers that populate Hollywood mega agencies like Creative Artists Agency. His success traces back to a chance encounter with James 12 years ago that has put him at the nexus of a renaissance for not only the Cavaliers but also the psyche of Cleveland and Northeast Ohio.”
— New York Times on Rich Paul, Lebron James’
Trained or experienced advisors bring a number of different skills, years of experience and training, and a network of other professionals that benefit athletes. Advisors include lawyers, financial planners, agents, accountants, and managers. A sports agency can offer the services of multiple advisors in one place.
It is important to remember that it is rare to have a person who has expertise in one or more area. So it’s a good practice to seek the services of multiple advisors. For example, a lawyer is an expert at practicing law and should handle all legal issues. An accountant is skilled in tax matters and should prepare your tax returns. A financial planner is adept at managing money and should manage your finances and retirement accounts. An agent should not do your taxes. However, it would not be unusual for a financial planner to be an accountant.
Los Angeles business manager Belva Anakwenze advises, “segregation of services . . . I’ll be your business manager, but someone else will do your taxes, and someone else will handle your investments. That way there are checks and balances.”
“[Corey] Jenkins gave the Summit partners his power of attorney soon after the Red Sox selected him .”
— Excerpts from ESPN The Magazine article called “How to Scam an Athlete”
NFL players Michael Vick, Eric Dickerson, and John Elway as well as NBA great Scottie Pippen, have all been scammed out of money. The scams range from shady investments to Ponzi schemes where the scammer takes money from someone to pay you (robbing Pete to pay Paul). In order for the scheme to work they must continually replenish the line of uninformed suckers ready to give away their money.
The one thing that is certain is that just because someone is wearing an expensive suit and driving a nice car doesn’t mean that they are trustworthy. In fact an agent (or advisor) who focuses on outward appearance and material things should raise your suspicions. The U.S. News & World Report reported in 2002 that 78 NFL players had been swindled out of a combined $42 million over a period of three years.
Most of the scams have some common characteristics. First, the scammer is always older and more experienced than the person being scammed. Second, the athlete typically does not have an interest in learning the basics of financial planning, banking, and investing. Last, the athlete gives up too much control, allowing access to bank statements and all investment accounts, even granting a power of attorney which allows someone to sign documents for the athlete.
In most cases, scammers should be easy to spot and avoid if you take some basic precautions. In the words of former NFL Safety, Keion Carpenter, “Make sure you get trusted advisors, legal and financial, from reputable firms . . . Don’t just rely on your financial advisor or business manger to do everything for you. You are the CEO of your finances so act as such.”