Like many Americans, financial advisers are tuning in to the Winter Olympics, but some are paying closer attention than others.
That is because some advisers have skin in the game, so to speak: clients who are competing in this year's Olympiad.
For RBC Wealth Management adviser Geoffrey Aunger, the journey to Sochi, Russia, began two years ago at the 2012 NHL draft in Pittsburgh. It was there that he met a future client, Zemgus Girgensons, an 18-year-old professional hockey prospect from Latvia.
Mr. Girgensons plays for the Buffalo Sabres but is skating for his native Latvia in the Olympics.
“From our perspective, it's obviously a really nice honor that rounds out his career,” Mr. Aunger said. “It's great to see where they started, and as they rise up and build on their career, and begin to dominate and to build their identity.”
Just as athletes invest blood, sweat and tears in their sport, advisers who want to represent top athletes also must compete and make sacrifices. The world of advising athletes is so competitive that advisers' time, money and resources often are spent building those relationships well before the athlete's first contract or sponsorship deal, even if it means that the relationship doesn't pan out.
“Some guys make it, but you don't know that when you're getting into it,” said Frank Zecca, managing director of Octagon Financial Services Inc., an independent advisory firm focused on professional athletes.
Individual success in Olympic events such as snowboarding or slalom in the winter games, or swimming in the summer, can be especially challenging to predict, said Mr. Zecca, whose roster of 150 professional athletes boasts some big names, including Olympic gold medalist Michael Phelps.
He said that he began working with Mr. Phelps when the swimmer was 15 (Mr. Phelps was 22 at the time of the 2008 Olympics).
“Financial advisers have almost become like agents,” said Mr. Zecca, who was a two-sport athlete in college.
Advisers say that they get involved with athletes because they care about the sports and players, but there is also a business case to be made.
For example, Mr. Zecca's client Ryan Miller, another Buffalo Sabres player, who is one of the goalies for the U.S. Olympic team, will make $6.25 million this season. Another client, NBA star Chris Paul, can earn as much as $18 million a year.
But despite some big-name successes, there are a number of risks involved in representing Olympic athletes, whose financial victory is often predicated on media attention and sponsorships, Mr. Zecca said.
“It's so market-driven by what NBC wants to promote,” he said. “How do you plan for someone's wealth when you have no idea what the wealth is or how much is going to come in?”
SAVING AND SCRIMPING
Often success comes after several years of saving and scrimping. Advisers generally spend the first few years with an athlete, who may still be making a minor-league salary, working on setting up banking operations and saving money.
Mr. Zecca also pitches his services as being able to help with taxes. He keeps accountants in-house to help deal with issues such as currency conversions or paying taxes on overseas earnings.
“We're doing all this stuff even before Dollar One is made,” Mr. Zecca said. “If the concepts are put in place at $50,000, it's not going to be a shock when he has more money.”
It can take some time before advisers know whether their investment will pan out, even if it sounds like a lock from the start.
Angelo Esposito, for example, was a first-round draft pick in the NHL and a much-sought-after client, but his career fizzled and he “struggled to find himself in the NHL,” Mr. Aunger said.
Mr. Esposito left the NHL after a short stint and plays for the Hockey Milano Rossoblu, a professional team in Italy.
“Obviously, we want to invest time into people that are going to have financial wealth that needs to be managed at some point,” Mr. Aunger said.
Working with athletes can be emotionally frustrating for advisers who have spent years following their clients' ups and downs. Mr. Aunger, who spent 23 years as a professional soccer player, goes to great lengths to watch his clients' games, and often calls to reassure them and refocus them on their long-term goals after a bad game.
Both Mr. Aunger and Mr. Zecca try to keep their clients on their roster, though sometimes at a reduced service level if assets don't grow after a few years.
Even if their careers are cut short, they can be a good source of referrals and often move into other well-paying fields or have savings that still need to be managed, Mr. Aunger said.
When the money does start rolling in, it can be sudden and overwhelming. Elizabeth Ruch, an adviser for Waddell & Reed Inc., puts together pools for where the “quick money” should go.
Ms. Ruch, who works with Jazmine Fenlator, the driver in the women's bobsled with Olympian Lolo Jones, who also was a track athlete in the Summer Olympics, uses a unique grid system. The idea is to show athletes where their money should go, based on how much is coming in from their contracts or sponsorships.
REINING IN SPENDING
That keeps athletes from misspending if a windfall comes in from a sponsorship deal or an appearance in a commercial, Ms. Fenlator said.
Some clients' first instinct is to buy a house or a car for their mother, she said.
So usually, the first grid level is designed to make sure that the athlete stays focused on accumulating wealth and protecting risk. Extra money in the budget goes first to disability or long-term-care insurance if that isn't provided by the league or association in which they compete.
“It's not as glitzy as buying a house or a car, but I encourage them to take care of the basics first,” Ms. Ruch said.
Not only do some of the athletes have less demand in certain seasons, but there are a number of potential pitfalls that could crush a retirement that isn't well-planned.
“It could be gone overnight,” Ms. Ruch said. “Suddenly, you're no longer the fastest, you're no longer the smartest or you're just not cutting it.”
Mr. Aunger said he isn't doing much financial planning around the Olympics specifically, aside from making sure that Mr. Girgenson's credit cards aren't turned down because of suspicious activity in Russia. But the adviser will be keeping his fingers crossed.
“The key really for them is to go represent their country, but because of success, who knows what could happen?” he said. “He's got a good opportunity to win a medal, so who knows?”