How Advisors Can Work with Parents to Protect Athlete Clients

STEE-RIKE!!!

Most people would like to think they can trust their family, especially their parents, with anything. But when it comes to a client’s finances, familial relationships can sometimes be the perfect opportunity for nefarious activity. Last month, Philadelphia Phillies third baseman Alec Bohm accused his parents in a lawsuit of defrauding him of millions of dollars under the facade of managing his finances. Court documents claim Bohm’s parents acted as his primary financial advisors and funnelled his money through several limited liability companies for their own use.

It’s not that parents can’t or shouldn’t be involved with the financial affairs of their high-earning athlete children, but advisors can help strengthen those relationships by building trust and preventing situations in which family members start taking advantage of each other. 

John Kovacs, managing director at RIA Wealthspire, has a handful of athlete clients whose parents have their children’s best interests at heart, and in those cases, he likes to double efforts on meetings, getting together every three months to keep everybody updated. “That ultimately makes the athlete more successful,” he told Advisor Upside. “We give back time, peace of mind and the ability to focus, so the client can play better ball, make more birdies or take more shots.” 

Thicker than Water

Athletes can be easy targets for friends, family or fundraisers looking to ride their coat tails, mainly because of how public their earnings often are, Kovacs said. “If you go to a PGA Tour event and you just made $2 million or $4 million, everyone knows that because it’s on ESPN.com,” he said. Bohm, for instance, recently signed a one-year contract with the Phillies for more than $10 million. That’s when clients need to put their guards up and direct any investment opportunities to their advisors, Kovacs added.

Tee Time’s in 10 Years. Family members dipping into or mismanaging the accounts of their high-earning relatives is a tale as old as time, and it can have severe consequences:

• NHL player Jack Johnson filed for bankruptcy in 2014 after his parents took out multiple large, high-interest loans against his future earnings. He ended up with roughly $50,000 in assets and debts of more than $10 million.
• America’s original sweetheart, Shirley Temple, earned about $3 million starring in musicals as a little girl. But by adulthood, she had only about $44,000 left due to poor financial decisions made by her father. Despite the major losses, she didn’t actually hold a grudge against him. What a Little Princess.
• Singer Billy Joel filed a $90 million lawsuit against his brother-in-law, who was managing his finances in the 1980s, for fraud and breach of contract. 

“There’s a negative connotation that parents shouldn’t be involved because you don’t really hear about all the great stories,” Kovacs said. “Some people, myself included, sacrifice a lot for their children’s athletics; capital, time. I personally don’t see myself playing weekend golf for the next 10 years.”