The sports world is very lucrative and can be a great market of opportunities for financial advisers.
There have been many stories about sports people receiving bad financial advice and ending up with a large tax bill from HM Revenue and Customs (HMRC) or, even worse, becoming bankrupt.
Some wealth firms have been expanding their divisions to cater for the financial affairs of sports people, including UBS, which unveiled its athletes and entertainers division in November 2020.
Tilney is one of those companies looking to grow in the sports wealth market after it launched its private client sports arm in June 2020.
‘Antithesis’
Simon Andrews, business development manager at Tilney Smith & Williamson, told International Adviser: “I think we want to be diverse across all sports, because sports people all need help, whichever sport they’re playing. This means not to be too focused on football, which traditionally has been a large percentage of our clients.
“We’re talking to a business at the minute with inroads into golf and tennis, for example, having lots of conversation around boxing because that’s been neglected, for whatever reason over the years, in terms of having a point of trust.
“I’d like Tilney be seen as that force for good, that safe pair of hands, the antithesis of the bad advice that’s gone on historically, and has caused a lot of heartache for sports people, where they’ve not necessarily have the right guidance and direction.
“We want to work with really good agents, we want to work with football clubs that want to look after the players.
“We want to work with sports bodies that are proactive, it’s for us to be seen as that force for good in the future and be the leader in the field of not just financial planning, but also the educational aspect as well, and in some cases, the innovator within the industry.”
Segmentation
The introduction of Prod regulation sparked the debate about the benefits of segmentation.
Tilney is not the first company to launch a sports private client arm, but Andrews thinks more firms will be looking to unveil a similar offering.
“Due to covid, the whole world is going through a financial reset,” Andrews said. “Sport is largely dependent on income through broadcasting and we’ve don’t know how that’s going to look a lot like in the future.
“At Tilney Smith & Williamson, we want to be proactive, work with the right agencies and work with the clubs to educate the players. I’d be surprised if other companies weren’t looking to do the same things.
“I would say that moving forward, not just with covid, but with the financial world around sport, I think it’s really important for companies to get on the front foot and not necessarily wait for business to come to them.
“Players want help. They want advice and they need guidance from specialist people.”
Different to ‘normal’ clients
The average sports star has a career for around 10 years. They earn their money in a very short period and then it can be all over in with a blink of an eye.
Therefore, units dedicated to sports clients can be a necessary part of financial advice.
“The first difference for a sportsperson is that they have got a really short career,” Andrews said. “The ability to make good financial decisions is so much more important than an existing client because they simply can’t afford to make too many mistakes with what they do with their money.
“I think also the key difference is that money can come quite quickly when you’re a sports person, often before any form of education of how to handle the finances has taken place.
“There’s not nothing on the national curriculum about how to handle your income and expenditure when it suddenly changes. And I think if you look at the typical young player, certainly in the Premier League, they can go from earning not a lot to quite a lot within a very short period.
“That is a huge transition and takes a lot to get their heads around. A lot of sports are working class, and sometimes the sort of socio-demographic backgrounds of both parents and players doesn’t necessarily lend itself to being the most educated from a financial perspective.”
Investment strategy
With sports stars, especially footballers, they are paid large sums of money weekly.
This means that the investment strategy could be different to a standard client.
Andrews, who joined the firm several months ago, added: “They’re definitely very different from what we call traditional investors. They may tend to invest monthly, as opposed to just invest on a one-off basis.
“A business owner or a retired client, they would typically have an amount of money to invest and maybe not a substantial income. Those are the sort of key differences. It’s just being very flexible with how they are paid and how they understand money and reflecting that in the planning.
“There are some real basics that we like to encourage the players to do, but it starts out with cash flow modelling, which is looking at their income and expenditure.
“It will help educate the player about what they need to save to get enough to retire on at a certain age. And of course, you have got the other scenario where some players might not reach the end of their career.
“Their career might be cut short through injury, or they might fall out of favour with the club, fall out of love with the game, all sorts of things that can get in the way of somebody’s career.
“Unlike normal clients, where we would see them bi-annually or annually, they need to be seen on a regular basis because the circumstances can change quite quickly.”
Education
The importance of financial education is paramount throughout the whole of financial advice.
But sports clients, with their irregular income and short careers, they need to be on the ball from a very early age, which is why firms need to help educate these stars.
Andrews said: “I think clubs are being more proactive in this area and bringing people in. We’ve done a number of presentations since I’ve joined Tilney and we observed a presentation from Smith and Williamson at Chelsea a few days ago.
“But I don’t think that’s enough. They need a person to talk to about money that they can trust, somebody they can turn to.
“It’s the education and mentoring side, which is often lacking. And if you’re looking at historically why players have made bad choices or bad investments, it’s because there’s been an inherent lack of education, coupled with the inability to talk to somebody impartially about ‘what I should do’.”
Proactive
The industry can be proactive in its approach to educate sports stars.
Andrews said that he has recently contacted “lead agencies in the UK” to discuss approaching players at the age of 16 or 17 about finances.
“A lot of these players won’t make it, but we’re willing to put the time aside to help them because this is about helping the person not the player,” he added. “One of the things that I say is person-first player-second, not the other way around. This is a young person who needs help with money, like all of them do. For me, the earlier that this process can start the better.
“This is why we are looking to work with some of the better agencies, and certainly the most proactive clubs, on helping the players, mentor them financially from a very young age.
“If we are successful in this area, we’d be working with players on a one-to-one basis as well, not just presenting to them in groups because finance is a very individual thing.
“What might be right for one player might not be right for another player, you can’t really put people or their individual family circumstances into one. It’s not a one size fits all approach.”
