A version of this article was originally featured in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly publication for high net worth investors and consumers. To receive upcoming editions directly in your inbox, you can sign up.
The escalating salaries of top athletes and the lucrative deals for college players have sparked a new rush for wealth management firms. Juan Soto’s $765 million contract with the New York Mets of Major League Baseball showcases the unprecedented wealth being generated by professional athletes and the opportunities for wealth management firms handling their investments. The increasing earnings of college players for their name, image, and likeness, along with the growth of women’s sports, have made sports a significant driver of growth in wealth management due to the expanding population and wealth of professional athletes.
Molly Cloud, a financial advisor and director of sports and entertainment at Morgan Stanley, noted the substantial increase in numbers in recent years. She mentioned that the influx of money has made their job more complex and exciting, as they are now part of this growth that wasn’t present a decade ago.
Wealth management firms, including longstanding leaders such as Morgan Stanley, Bernstein, UBS, and Goldman Sachs, as well as multifamily offices like Rockefeller Capital Management and private equity firms, are broadening their sports and entertainment divisions. They are also hiring former athletes to attract more clients.
James Beale, a former hockey player and now the development director for Rockefeller Capital Management’s Rockefeller Global Family Office overseeing the Sports and Entertainment group, emphasized the importance of his experience as a former athlete in understanding and assisting athletes in managing their wealth effectively.
Advisors to wealthy athletes face unique challenges due to the young age at which athletes earn significant amounts of money. Unlike most wealth creators who accumulate wealth as they age, athletes often experience their peak earnings early in their careers, presenting specific risks and financial management needs.
Education plays a crucial role in advising professional athletes due to their youth and focus on their careers, making them susceptible to scams, fraud, and poor investments. Advisors work with athletes to navigate complex tax issues, such as the jock tax, and help them make informed financial decisions, including saying “no” to potentially detrimental investments or purchases.
Wealth advisors also assist athletes in planning for their post-playing careers, emphasizing the importance of long-term financial planning, investment strategies, and developing additional income streams beyond their athletic careers. The evolving landscape of investments preferred by young athletes, such as equity stakes in tech companies and involvement in emerging sectors like crypto and artificial intelligence, requires advisors to adapt and provide tailored guidance to meet their clients’ evolving needs.
