Juan Soto, then of the New York Yankees, in action during the sixth inning against the Seattle Mariners at Yankee Stadium in the Bronx borough of New York City on May 22, 2024.
Sarah Stier | Getty Images Sport | Getty Images
A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high net worth investor and consumer.Sign upto receive future editions, straight to your inbox.
Skyrocketing salaries for top athletes and lucrative deals for college players have touched off 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 being created by pro athletes, and the opportunities for wealth management firms that are handling their investments. With college players now earning six and seven figures for their name, image and likeness as well as women’s sports on the rise, the population and wealth of pro athletes has made sports a key driver of growth in wealth management.
“The numbers have gone through the roof,” said Molly Cloud, financial advisor and director of sports and entertainment at Morgan Stanley. “There is so much money that wasn’t around 10 years ago. It makes our job more complicated and exciting to be part of that growth.”
From longtime leaders in the space such as Morgan Stanley, Bernstein, UBS and Goldman Sachs, to multifamily offices including Rockefeller Capital Management and even private equity firms, wealth managers are expanding their sports and entertainment segments and hiring former athletes to recruit more clients.
James Beale, a former hockey player, is now development director for Rockefeller Capital Management’s Rockefeller Global Family Office and oversees the Sports and Entertainment group. Beale said that while athletes aren’t all that different from other high net worth clients, having experience as a former athlete helps.
“I’ve seen a lot of friends in [sports] who maybe didn’t spend enough time being intentional around their wealth. That put them in a tough spot. So understanding that and trying to help people avoid those hiccups at earlier stages in their career has positioned me well in overall athlete network,” Beale said.
Beale said athletes, similar to other high net worth clients, often spend most of their time on their business or career and don’t have much bandwidth for investing.
“They put 99% of their time into taking care of their body, managing their health and training,” Beale said. “It’s very similar to an entrepreneur who’s focusing all their time on their business here. We come in as a trusted partner to help them manage their finances and give them back the time to focus on their craft.”
Other advisors to wealthy athletes, however, say they have unique challenges. Unlike most wealth creators, who create their wealth as they get older, athletes make their biggest windfalls at a young age. Handling millions as a 20-something year old or, increasingly, even a teenager, carries special risks.
“They are earning more at a younger age than they ever will during the rest of their life,” said Stacie Jacobsen, national director for client engagement and co-lead of the sports, media and entertainment group for Bernstein Private Wealth Management. “Their relationship with money is almost unique to almost anyone else we work with.”
Given their relative youth, education is key to advising pro athletes. Jacobsen said athletes are used to exuding confidence, so they’re often uncomfortable asking questions about investing.
“There’s this sense that, ‘Yeah, I got this,'” she said. “Behind the scenes, they really don’t. So I have to be open and will say, ‘Do you have any other questions on these areas?’ or ‘Is that something you want to dive deeper into?'”
Their age and hyperfocus on their careers make pro athletes easy prey for scams, frauds and bad investments. MLB phenom Shohei Ohtani discovered $16 million had vanished from his account. His interpreter later plead guilty to stealing from Ohtani’s accounts to cover gambling losses.
A 2021 report from EY found that pro athletes lost nearly $600 million between 2004 and 2019 due to fraud.
Taxes are another big challenge for pro athletes. The so-called jock tax, where athletes often owe taxes to states where they play or earn income, can be complex and time-consuming to calculate. Wealth advisors say they work with athletes to keep detailed records and plan the best tax domicile.
Advisors say their biggest job in working with pro athletes is helping them say “no.” Whether it’s friends or family pitching them investments, or an impulse purchase of a $400,000 Lambo or $800,000 Richard Mille watch, young athletes are vulnerable to costly decisions.
“If one of my clients comes to me and says, ‘I want to buy this car’ and it wasn’t in our original financial plan, I will say, ‘Not yet,'” Jacobsen said. “Or I will say, ‘OK but here is the impact of that purchase on your financial plan and it may take longer to achieve the priorities you originally set out.'”
When clients come to her with investments recommended by friends or family, Jacobsen helps them get more information on the business and do proper due diligence. The same goes for real estate.
“If a client says, ‘I want to buy this house I just saw,’ I’ll say, ‘Why? Is it good value? Who’s going to use it? What’s the long-term investment strategy?'” she said.
Pro athletes used to become partners in restaurants, car dealerships and other consumer-facing businesses that benefited from their image, whereas today’s young athletes want equity stakes in fast-growing tech companies with board seats. Crypto and artificial intelligence are also popular, advisors say.
Ultimately, being a wealth advisor to pro athletes is about preparing them for life after the game. Many careers are short and unpredictable, especially in the National Football League. Advisors say they have to be the biggest cheerleaders for their clients while they’re playing, but also plan for the inevitable.
That includes everything from the investment plan to building a second career to negotiating long-term brand deals and income-generating assets.
“They realize this is likely their best shot at creating significant wealth,” Jacobsen said. “They’re taking it seriously, developing a professional team and starting to get involved and ask the right questions.”
