How Advisors Can Help Clients Scratch the Sports Betting Itch Without Blowing Up Financial Plans

What are the chances the Mets win the World Series this year? Probably about the same as the odds that sports betting will lead to long-term financial success. So, pretty low. 

Still, one in eight investors say they treat sports betting as a deliberate part of their long-term strategy, including more than 25% of Gen Z investors and 14% of millennials, according to a recent Betterment survey. And it’s only getting more popular: The industry has grown from about $400 million in 2018 to nearly $17 billion today. While gambling may not be a sustainable plan for building long-term wealth, advisors can help clients scratch that itch in a way that doesn’t threaten their overall financial security. 

Stoy Hall, a CFP and founder of Black Mammoth, said that he recommends clients allocate 1% or 2% of their portfolio to “fun money,” which could include sports betting. “If they hit it big, fantastic, then we can implement the rest of the plan. But if not, then it’s not going to tank them,” said Hall. If more advisors took this approach, “then we wouldn’t have to worry about them going in a deep hole and becoming in debt out their ears.” 

Trade Season

Sports betting has grown much easier to access, and the sleek tech platforms and financial language have added a veneer of legitimacy, said Clifford Cornell, an advisor at Bone Fide Wealth. “There’s a subtle psychological change in people’s minds when they think ‘I’m buying five contracts on the Mets’ versus ‘I took the Mets money line,’” Cornell said. “One makes it seem like I’m trading some complex financial instrument, and the other is outright gambling.” 

According to the survey: 

• 52% of Gen Z respondents said they have redirected money meant for investing into sports betting, including 14% who said they do so multiple times a month. 
• Only about a third of Gen Z investors said they don’t engage in sports betting at all. 

But Cornell was skeptical that the money redirected away from investing was actually meant for long-term holdings, as about a quarter of young men are day trading. “It was gambling to begin with,” he said. “It’s just changing form.” 

The Odds Are Stacked Against Us. Younger generations are more likely to feel distrustful about the traditional avenues of wealth building, which may explain their turn toward sports betting, said Andrew Herzog, a CFP at the Watchman Group. “Millennials have seen the Great Recession, COVID turmoil, and geopolitical chaos in their adult lives — wrench after wrench in the works,” he said. “So they turn to alternatives, and particularly, things that they already know and understand.”