What can $150 million get you?

[JasonEvans]

In what should be not shocking to anyone, Allen Iverson's bank account is being seized (http://www.thepostgame.com/blog/dish/201202/allen-iverson-has-no-answer-financial-woes)because AI is broke and cannot pay money that he owes to a jeweler.

AI made more than $150 million in his basketball career, probably many millions more from endorsements too, and it is all gone -- largely to pay for (http://content.usatoday.com/communities/gameon/post/2012/02/did-allen-iverson-blow-154-million-in-career-earnings/1) the scores of "friends" who made up his huge entourage and the lavish jewelery he bought for himself and his mother.

Still, the notion that AI could blow that much money... wow. Monty Brewster would be proud.

-Jason "if AI got a penny every time someone said, 'PRACTICE, WE TALKIN ABOUT PRACTICE...' he'd be rich again pretty soon" Evans

[UrinalCake]

I once heard a great description of the psychological profile of families at different income levels. Lower-income families tend to see money as a way to meet basic needs. Middle-income families see money as something to be saved for the future. And high-income families see money as something to be managed.

So what happens in basketball (or other professional sports for that matter, but the effect seems the most pronounced in basketball) is that you get these kids who come from low-income families who all of a sudden become millionaires. Yet to them, money is still just a way to meet basic needs, because that's all they've known growing up. Their definition of "basic needs" simply changes, and when their careers end they are left with nothing.

It's not really fair to expect someone who grows up in poverty to magically become a shrewd financial investor who knows how to manage exorbitant amounts of money. Hopefully they'll surround themselves with good people who can be trusted to advise them appropriately. But as we all know, that doesn't always happen either.

It's easy to pass judgment on these guys and say it's their own fault, but I think most people in their situation with their background would probably do the same thing. Hopefully the NBA or maybe the players union will start to take some accountability into advising these guys when they come into the league. But then again what 19 year-old with a $10 million contract is going to listen when someone tells them to start saving for their future?

[arnie]

I once heard a great description of the psychological profile of families at different income levels. Lower-income families tend to see money as a way to meet basic needs. Middle-income families see money as something to be saved for the future. And high-income families see money as something to be managed.

So what happens in basketball (or other professional sports for that matter, but the effect seems the most pronounced in basketball) is that you get these kids who come from low-income families who all of a sudden become millionaires. Yet to them, money is still just a way to meet basic needs, because that's all they've known growing up. Their definition of "basic needs" simply changes, and when their careers end they are left with nothing.

It's not really fair to expect someone who grows up in poverty to magically become a shrewd financial investor who knows how to manage exorbitant amounts of money. Hopefully they'll surround themselves with good people who can be trusted to advise them appropriately. But as we all know, that doesn't always happen either.

It's easy to pass judgment on these guys and say it's their own fault, but I think most people in their situation with their background would probably do the same thing. Hopefully the NBA or maybe the players union will start to take some accountability into advising these guys when they come into the league. But then again what 19 year-old with a $10 million contract is going to listen when someone tells them to start saving for their future?

I don't agree that most people in their background would probably blow $150 million. Of course even if they might, why can't lawyers turned agents at least guide them properly?? I guess the typical attorney agent cares only cares about his %%

[Jderf]

I once heard a great description of the psychological profile of families at different income levels. Lower-income families tend to see money as a way to meet basic needs. Middle-income families see money as something to be saved for the future. And high-income families see money as something to be managed.

So what happens in basketball (or other professional sports for that matter, but the effect seems the most pronounced in basketball) is that you get these kids who come from low-income families who all of a sudden become millionaires. Yet to them, money is still just a way to meet basic needs, because that's all they've known growing up. Their definition of "basic needs" simply changes, and when their careers end they are left with nothing.

It's not really fair to expect someone who grows up in poverty to magically become a shrewd financial investor who knows how to manage exorbitant amounts of money. Hopefully they'll surround themselves with good people who can be trusted to advise them appropriately. But as we all know, that doesn't always happen either.

It's easy to pass judgment on these guys and say it's their own fault, but I think most people in their situation with their background would probably do the same thing. Hopefully the NBA or maybe the players union will start to take some accountability into advising these guys when they come into the league. But then again what 19 year-old with a $10 million contract is going to listen when someone tells them to start saving for their future?

Personally, I am also sympathetic to the sociological explanation. A lot of these kids really are thrust into a totally new world and are not prepared, which is why I think it is a good thing that most professional sports leagues are starting (or looking into starting) financial education programs for their members. But at the same time, $150 MILLION DOLLARS!?!? Good god, man. How could Iverson possibly have been unaware of the obscene sums bleeding out of his accounts? How do you even spend that kind of money? What kind of things do you buy? Thinking about the better ways that cash could have been used... can't help but shake your head.

[Indoor66]

Personally, I am also sympathetic to the sociological explanation. A lot of these kids really are thrust into a totally new world and are not prepared, which is why I think it is a good thing that most professional sports leagues are starting (or looking into starting) financial education programs for their members. But at the same time, $150 MILLION DOLLARS!?!? Good god, man. How could Iverson possibly have been unaware of the obscene sums bleeding out of his accounts? How do you even spend that kind of money? What kind of things do you buy? Thinking about the better ways that cash could have been used... can't help but shake your head.

That is a WHOLE lot of entourage and Jewels.

[yancem]

The phenomenon is not restricted to athletes and movie stars either. I forget the exact percentage but the vast majority of lottery jackpot winners are broke within a few years of winning. It amazes me that when people suddenly come into large sums of money that the first thing the do isn't talk to a reputable financial planner. Rule number one in life should be know what you know and seek out advice for things that you don't know. I am so glad that I was raised to save for a rainy day. That may be one of the most important lessons my parents ever taught me and one that I am trying to teach my children (not easily done at ages 5 and 8). It sometimes means that you are not always driving a shiny new car but it also means that when that older car breaks down, you can afford to have it repaired. The unfortunate thing about the athletes, movie stars and lottery winners is that they have the money for the new car and to save for the rainy day but they instead but 8 six figure cars!

[Reilly]

The union angle is interesting. Rather than financial education or literacy (which will go in one ear and out the other of a young person the same way alcohol, drug, safe driving, pick-your-topic education does), why not mandate that some portion of a player's compensation be set up in some (future) income producing fashion? That is, x% of each check goes to creating the income stream, downstream. Make it a standard part of the NBA contract. That way, AI could have blown through $135 million, but $15 million would've been forcibly directed into some other vehicle, which he could then blow bit by bit, later.

[hurleyfor3]

The union angle is interesting. Rather than financial education or literacy (which will go in one ear and out the other of a young person the same way alcohol, drug, safe driving, pick-your-topic education does), why not mandate that some portion of a player's compensation be set up in some (future) income producing fashion? That is, x% of each check goes to creating the income stream, downstream. Make it a standard part of the NBA contract. That way, AI could have blown through $135 million, but $15 million would've been forcibly directed into some other vehicle, which he could then blow bit by bit, later.

Such a thing exists in all the major sports leagues, in fact. All the players' unions run Taft-Hartley retirement plans and quite generous 401ks. However, players generally cannot access these until their 50s or 60s, the same as most union plans and social security.

I'm not sure they can start paying out at the typical sports retirement age (30-35) without changes in federal law. Also, such plans are designed to support an upper-middle-class lifestyle, but not an NBA playa lifestyle.

I agree most athletes could use much better financial planning, but think this is more a matter between employee and union, not employee and employer.

[Kilby]

I bet a lot of them do have financial managers but the managers are intent on transfering the players money into their own account. Can you imagine the money making deals that these guys are pitched every day to swindle them out of their money. And, A lot of these deals take in their share of millionares that you would think would be more savy. A friend of mine asked me about an investment being pitched to him that would give him a way of making a 100% return within a year. He was a smart guy. I tried to explain to him what reasonable returns would be based on acceptable risk, and why all sorts of alarm bells should be ringing. It took him three years to tell me I was right and how much money he lost.

[Indoor66]

I bet a lot of them do have financial managers but the managers are intent on transfering the players money into their own account. Can you imagine the money making deals that these guys are pitched every day to swindle them out of their money. And, A lot of these deals take in their share of millionares that you would think would be more savy. A friend of mine asked me about an investment being pitched to him that would give him a way of making a 100% return within a year. He was a smart guy. I tried to explain to him what reasonable returns would be based on acceptable risk, and why all sorts of alarm bells should be ringing. It took him three years to tell me I was right and how much money he lost.

What is that old saying: If it seems too good to be true....

[wilko]

What is that old saying: If it seems too good to be true....

I'm partial to:
"I spent my money on women and booze - the rest I just *urinated * away.."

[gus]

I'm partial to:
"I spent my money on women and booze - the rest I just *urinated * away.."

Now looka here...
I did not say I was a millionaire...
But I said I have spent more money than a millionaire!
Cause if I had've kept all my money that I'd already spent,
I would've been a millionaire a looong time ago...

[superdave]

Such a thing exists in all the major sports leagues, in fact. All the players' unions run Taft-Hartley retirement plans and quite generous 401ks. However, players generally cannot access these until their 50s or 60s, the same as most union plans and social security.

I'm not sure they can start paying out at the typical sports retirement age (30-35) without changes in federal law. Also, such plans are designed to support an upper-middle-class lifestyle, but not an NBA playa lifestyle.

I agree most athletes could use much better financial planning, but think this is more a matter between employee and union, not employee and employer.

Since Iverson has creditors coming after him, can they make a claim to his NBA pension? I sort of hope not for his sake. And Scottie's sake. And Antoine's sake.

[hurleyfor3]

Since Iverson has creditors coming after him, can they make a claim to his NBA pension? I sort of hope not for his sake. And Scottie's sake. And Antoine's sake.

Probably not if he's not yet eligible to receive it. Generally, retirement plan assets cannot be touched but income can be. This goes for ordinary 401k plans and IRAs as well. Even then, one is generally entitled to a base level of earnings.

Nothing I've read says he has filed for bankruptcy yet. This may just be one creditor looking to get paid, which he may be able to fulfill from some other account, or by selling a house or something. Charles Barkley had a similar problem with a casino a few years back, but he had the money to pay it.

If he needs money his best option is probably to play overseas, where he's less likely to have a posse of 50 people around.

[BlueDevilBaby]

Qualified retirement plan (e.g., defined benefit pension and 401(k)/profit sharing plan) money cannot be touched until actually distributed to the participant, except in the case of divorce. IRAs are a different matter, with state statutes governing when IRA assets are reachable by creditors. Football players also have nonqualified deferred compensation plans, as do PGA golfers. Not sure if the same for NBA players but I imagine they do for signing bonuses, for example. Assets in those plans remain the employer's until vested/paid. So, Iverson might still have a tidy sum coming to him at some point. Doesn't help him now though.

[OldPhiKap]

If he needs money his best option is probably to play overseas, where he's less likely to have a posse of 50 people around.

Just how big is a metric posse?

"Meet my deca-posse of 10"

[hurleyfor3]

Just how big is a metric posse?

"Meet my deca-posse of 10"

Then they demand to be paid off and AI shoves them a wad... of shekels.

He should go play in Greece, actually. Living beyond his means, making fiscal promises he can't keep, living on past glory... he'd fit right in.

[NSDukeFan]

Patrick Ewing obviously had it right during the 1998-99 lockout when he said:

Sure, we make a lot of money, but we spend a lot, too.
or something to that effect.

[rasputin]

I don't agree that most people in their background would probably blow $150 million. Of course even if they might, why can't lawyers turned agents at least guide them properly?? I guess the typical attorney agent cares only cares about his %%

So you don't know the facts, and just choose to cheap-shot "attorney agents"?

[superdave]

Qualified retirement plan (e.g., defined benefit pension and 401(k)/profit sharing plan) money cannot be touched until actually distributed to the participant, except in the case of divorce. IRAs are a different matter, with state statutes governing when IRA assets are reachable by creditors. Football players also have nonqualified deferred compensation plans, as do PGA golfers. Not sure if the same for NBA players but I imagine they do for signing bonuses, for example. Assets in those plans remain the employer's until vested/paid. So, Iverson might still have a tidy sum coming to him at some point. Doesn't help him now though.

Ah. This is what I was thinking of. I know someone who signed away his MLB pension to his ex-wife.

I would assume Iverson could play in one of the Euro leagues and make a little money. I did see recently he was possibly going to play in PR. (http://www.csnphilly.com/blog/sixers-talk/post/Iverson-still-drawing-interest-from-Puer?blockID=651010&feedID=2365)

[davekay1971]

Whether or not it would have helped AI, I really think the NCAA and its member institutions need to be doing more to prep these guys for the financial aspect of their athletic future.

Take a guy with no background in managing money who's 19-20 years old. Mix in a poor educational background (frequently, though not always). Throw in a complete lack of education in contracts, investment, long term financial planning. Stir in a posse of leeches. Add a dash of agent/manager/publicist (all in bed together). Cook in the oven of a short period of earning an extremely large amount of money.

These guys are extremely ill prepared to handle a very odd earning stream. Unfortunately, the NCAA and the colleges, by and large, do nothing to prepare them. While we bat around and debate whether or not the colleges should pay a stipend to the kids while in school, why don't we discuss a program designed for the kids who have a likelihood of making a living as a professional athlete. They should receive formal education in:

Contracts and contract law...at least how to READ a contract and know what they are signing.
Appropriate roles of agent/publicist/manager...what they should be expecting to get from these employees.
Investing strategy designed for making the bulk of your income by 30-35 years old.
Managing income for an uncertain earning stream.
etc.

None of that may have saved AI from bankrupcy...but it could save a lot of other kids from a similar set of problems down the line.

[Indoor66]

Then they demand to be paid off and AI shoves them a wad... of shekels.

He should go play in Greece, actually. Living beyond his means, making fiscal promises he can't keep, living on past glory... he'd fit right in.

He can stay in the U. S. if that is the defining standard!

[dball]

The NBA does have a required seminar for rookies. It includes some financial info but mostly tries to help them avoid money, fame and sexual harassment issues. Not sure this was in effect when AI was coming into the league though.

[OldPhiKap]

New car
caviar
four-star day dream
think I'll buy me
a foot.ball team . . . .

[sagegrouse]

I don't agree that most people in their background would probably blow $150 million. Of course even if they might, why can't lawyers turned agents at least guide them properly?? I guess the typical attorney agent cares only cares about his %%

The two agents I know, one retired here in Steamboat and the other a Duke classmate, really tried to work with their clients on money management and investments. I met a number of the former's players, several of whom credited him for their relative well-being after baseball (he did mostly pitchers, Reuschel, Otto, etc.). The agent himself says that a number of players just wouldn't listen to him and suffered.

The Duke guy, known to many here, used to pay for a Caribbean vacation for his guys and bring in investment advisors and financial experts.

You know, I wonder if the union should take an active role and compel players to set money aside through the way contracts are paid out?

sagegrouse

[Kdogg]

Whether or not it would have helped AI, I really think the NCAA and its member institutions need to be doing more to prep these guys for the financial aspect of their athletic future.

Take a guy with no background in managing money who's 19-20 years old. Mix in a poor educational background (frequently, though not always). Throw in a complete lack of education in contracts, investment, long term financial planning. Stir in a posse of leeches. Add a dash of agent/manager/publicist (all in bed together). Cook in the oven of a short period of earning an extremely large amount of money.

These guys are extremely ill prepared to handle a very odd earning stream. Unfortunately, the NCAA and the colleges, by and large, do nothing to prepare them. While we bat around and debate whether or not the colleges should pay a stipend to the kids while in school, why don't we discuss a program designed for the kids who have a likelihood of making a living as a professional athlete. They should receive formal education in:


The thing is the NBA and the union offer this type of advice to players. It's literally force feed to the rookies. The agents also have financial planners on call and some agents even put their clients on a weekly allowance. They are getting the advise, it's just getting drowned out or ignored.

The problem is these guys have trouble saying no to "family and friends." And it's really tough to say no especially when you can relate and emphasize with them. It's happened to Iverson, Walker, Derrick Coleman, etc...

Anytime a see a story about an athlete loosing his fortune I think of Jamal Mashburn. The guy turned a successful NBA career into an extremely successful post NBA career. He's probably making more now that when he was a player. He should be the posterboy for pro athletes.

[UrinalCake]

I think it's all on the player's union. It's not the NCAA's job at all. It's bad enough that so many players go to school with no intention of actually studying or learning anything. Now we're going to create additional classes just to cater towards these guys? That would be a horrendous misuse of a school's resources. The NBA might take some responsibility, but would probably only do so for the purpose of protecting its image. When stories like AI's make the news it propagates the idea of players not being smart and, let's be honest here, can also feed into some racial stereotypes that certain fans may have. But if the players union really has the players' best interests in mind, then it would provide education and resources for financial planning.

AI's case is a little interesting to me because he had a pretty long career, including years in the end where he didn't make as much money. Then he played for several more years overseas. You would think that as a guy's income started tapering he would gain some perspective and realize that the money's not going to be there forever. I remember SI doing an article during his early years where he described all of the people who he was supporting. It was mostly family members who were basically living off of him. Even with a multi-million dollar contract, once you take out taxes, agent fees, lavish living expenses, etc., then divide by multiple hangers-on, that money goes pretty fast.

[brevity]

Some interesting viewpoints on this thread, which I initially feared would be simply dismissive of the Answer.


The problem is these guys have trouble saying no to "family and friends." And it's really tough to say no especially when you can relate and emphasize with them. It's happened to Iverson, Walker, Derrick Coleman, etc...

I think this is the key. There's nothing in human nature that suggests that a person who suddenly comes into money should trust a stranger to handle it. And generally, people in the financial planning world are strangers.

It's logical to think that your parents, who worked within a much tighter budget when you were growing up, should be entrusted to do the same thing on a much larger scale. But being able to manage a low-to-middle-income household is not the same thing as managing wealth. (And vice versa, politicians.)

[CrazyNotCrazie]

I'm guessing most of the blame is on Iverson here, but any agent worth his salt should have been advising him, or directing him to someone who would advise him, to sock away at least a portion of his money. Doing a little Googling, Iverson's agent is Leon Rose, who seems to have a pretty legit stable of clients. Big John Thompson should have also been lecturing Iverson coming out of Georgetown, but I'm guessing that even if he had, AI wouldn't have listened. Mo money, mo problems.

[moonpie23]

Take a guy with no background in managing money who's 19-20 years old. Mix in a poor educational background (frequently, though not always). Throw in a complete lack of education in contracts, investment, long term financial planning. Stir in a posse of leeches. Add a dash of agent/manager/publicist (all in bed together). Cook in the oven of a short period of earning an extremely large amount of money.

These guys are extremely ill prepared to handle a very odd earning stream. They should receive formal education in:

Contracts and contract law...at least how to READ a contract and know what they are signing.
Appropriate roles of agent/publicist/manager...what they should be expecting to get from these employees.
Investing strategy designed for making the bulk of your income by 30-35 years old.
Managing income for an uncertain earning stream.
etc.

.

wait, are we talking about sports? or the music business? :cool:

[SupaDave]

This MIGHT sound crazy until you think of all the Americans that live check to check. Not that big a difference really. Pro athletes still get paychecks (unlike entertainers who do receive a great portion of their monies in lump sums). They don't get a $150 million check. Living check to check on a $150 million sounds like a fabulous life until you think of all the taxes involved over the years. He's probably spent $60 million of that in taxes alone if he had only the minimum retirement accounts. Add losing Reebok money and NBA checks and the next couple of years become very tough when the IRS and creditors come calling - b/c EVERYONE gives you credit when you make that kind of dough (same with Vick - who is ironically from the same dang neck of the woods).

[davekay1971]

I think it's all on the player's union. It's not the NCAA's job at all. It's bad enough that so many players go to school with no intention of actually studying or learning anything. Now we're going to create additional classes just to cater towards these guys? That would be a horrendous misuse of a school's resources. The NBA might take some responsibility, but would probably only do so for the purpose of protecting its image. When stories like AI's make the news it propagates the idea of players not being smart and, let's be honest here, can also feed into some racial stereotypes that certain fans may have. But if the players union really has the players' best interests in mind, then it would provide education and resources for financial planning.

AI's case is a little interesting to me because he had a pretty long career, including years in the end where he didn't make as much money. Then he played for several more years overseas. You would think that as a guy's income started tapering he would gain some perspective and realize that the money's not going to be there forever. I remember SI doing an article during his early years where he described all of the people who he was supporting. It was mostly family members who were basically living off of him. Even with a multi-million dollar contract, once you take out taxes, agent fees, lavish living expenses, etc., then divide by multiple hangers-on, that money goes pretty fast.

I think the colleges do have some responsibility. For guys who have a realistic shot at the pros, college is essentially a trade school - learning what they need to learn for their job. A lot of that happens on the practice court and in college games. Some needs to happen in a classroom. Not necessarily as Econ 301 - Managing Your Pro Income and Econ 302 - Keeping Your Posse In Check. But some real education run by the athletic department on these issues.

Three major reasons the schools have responsibility:
1) It's the right thing to do. The athletic departments in college know which kids are likely future pros. They know the realities of the earning stream and career expectancy. They know the backgrounds these kids are coming from. They could do a great job preparing the kids in the 1-4 years that they are in school for the financial aspect of their upcoming career.

2) It's not exactly unheard of for colleges to prepare their students to work in their chosen career. Yeah, the engineering school doesn't offer courses or counseling in dealing with agents, contracts, endorsements, and posses, but most engineers don't need that. The job of a college, to some extent, is to prepare young people to succeed in their career. Being a pro athlete is a unique career requiring unique prep.

3) Practically speaking, many of these guys have contracts and endorsement deals in place, with large amounts of money involved, before they have a chance to get to the NBA seminars. Some prep from college would be helpful.

Do the NBA and the players union have a major responsibility? Sure, they absolutely do. That doesn't mean colleges couldn't do more in identifying and counselling both the kids who will probably make the pros...and the kids who have been hoping to make the pros, but probably won't.

[SupaDave]

I think the colleges do have some responsibility. For guys who have a realistic shot at the pros, college is essentially a trade school - learning what they need to learn for their job. A lot of that happens on the practice court and in college games. Some needs to happen in a classroom. Not necessarily as Econ 301 - Managing Your Pro Income and Econ 302 - Keeping Your Posse In Check. But some real education run by the athletic department on these issues.

Three major reasons the schools have responsibility:
1) It's the right thing to do. The athletic departments in college know which kids are likely future pros. They know the realities of the earning stream and career expectancy. They know the backgrounds these kids are coming from. They could do a great job preparing the kids in the 1-4 years that they are in school for the financial aspect of their upcoming career.

2) It's not exactly unheard of for colleges to prepare their students to work in their chosen career. Yeah, the engineering school doesn't offer courses or counseling in dealing with agents, contracts, endorsements, and posses, but most engineers don't need that. The job of a college, to some extent, is to prepare young people to succeed in their career. Being a pro athlete is a unique career requiring unique prep.


Technically EVERYONE who goes to college is trying to go PRO in SOMETHING. Colleges still don't educate on 401ks, how to do your taxes, or how to pick good advisors.

Make the school responsible for the failures of pro athletes and every unemployed college grad in the world is open to sue their alma maters....

[davekay1971]

Technically EVERYONE who goes to college is trying to go PRO in SOMETHING. Colleges still don't educate on 401ks, how to do your taxes, or how to pick good advisors.

Make the school responsible for the failures of pro athletes and every unemployed college grad in the world is open to sue their alma maters....

I don't think there's the slightest connection between asking a college to provide SOME education or counselling to their future pro athletes, and opening up some legislative angle for unemployed college grads to sue colleges. But then, I'm not a lawyer. My view on this is based on what I see as a moral responsibility for colleges that know perfectly well who they're getting on their sports teams, the backgrounds these kids come from, the challenges they have, and what their pro-athletics earning stream looks like.

Of course, there is a humongous gulf between what is morally right and what is legally right. I'll leave it to the lawyers to understand what is legally right. I just know what I'd feel compelled to do if I were an AD.

[SupaDave]

I don't think there's the slightest connection between asking a college to provide SOME education or counselling to their future pro athletes, and opening up some legislative angle for unemployed college grads to sue colleges. But then, I'm not a lawyer. My view on this is based on what I see as a moral responsibility for colleges that know perfectly well who they're getting on their sports teams, the backgrounds these kids come from, the challenges they have, and what their pro-athletics earning stream looks like.

Of course, there is a humongous gulf between what is morally right and what is legally right. I'll leave it to the lawyers to understand what is legally right. I just know what I'd feel compelled to do if I were an AD.

Of course I understand the morality of it all but that's not real life. Next you'll be expecting the athletic department to wash their laundry and prepare their food - oh wait. An A.D.'s job is to represent the University, keep the programs out of trouble, be fiscally responsible, and to keep the grades up (and hopefully the graduation rates).

In an unusual twist, many of the athletes who skipped college are doing quite well.

[78Devil]

On the agent thing (not related to AI's agent, whom I do not know and may have done a great job), I have had some limited experience as I do estate planning law for a living. Several times over the years, I have done some work for professional athletes. Only once or twice have I seen that athlete in the hands of what I considered to be respectable money managers. Most of the time, it appeared to be hanger-on types brought in by the agent, and the agent carefully made sure that the athlete didn't have exposure to more mainstream financial providers who might compete. I cannot confirm this, but I had a strong suspician that the agents were getting cuts of the money managers' fees. Fortunately, the better experiences I have had have been more recent -- I think that the business is a little more open and respectable than it used to be with internet exposure and other things.

My most recent experience was to work on a prenup for the future wife of an NBA player -- and he had done a fantastic job of saving and being responsible, presumably with the help of his agent and financial adviser. So there are good stories out there, too.

Hopefully, AI's problem is liquidity and not wealth, and some of his wealth may just be tied up in assets where he can't get his hands on cash. Hope for the best for him, as he has been a wonderful athlete to watch over the years.

[Reilly]

... Colleges still don't educate on 401ks, how to do your taxes, or how to pick good advisors. ....

I know of one college that had certain "life" courses for graduating seniors -- from job interviewing to eating with the proper fork at a formal dinner. It seems colleges could do more in lots of areas -- demand more from students, impart more to them ....

[dukeENG2003]

I remember when they interviewed Derrick Rose about his new deal, he responded "I really don't know how much money I make".

[sagegrouse]

On the agent thing (not related to AI's agent, whom I do not know and may have done a great job), I have had some limited experience as I do estate planning law for a living. Several times over the years, I have done some work for professional athletes. Only once or twice have I seen that athlete in the hands of what I considered to be respectable money managers. Most of the time, it appeared to be hanger-on types brought in by the agent, and the agent carefully made sure that the athlete didn't have exposure to more mainstream financial providers who might compete. I cannot confirm this, but I had a strong suspician that the agents were getting cuts of the money managers' fees. Fortunately, the better experiences I have had have been more recent -- I think that the business is a little more open and respectable than it used to be with internet exposure and other things.

My most recent experience was to work on a prenup for the future wife of an NBA player -- and he had done a fantastic job of saving and being responsible, presumably with the help of his agent and financial adviser. So there are good stories out there, too.

Hopefully, AI's problem is liquidity and not wealth, and some of his wealth may just be tied up in assets where he can't get his hands on cash. Hope for the best for him, as he has been a wonderful athlete to watch over the years.

Another factor, which is not just a problem for athletes, is that portfolio management, or wealth management, is unbelievably dull, with no consumption elements (i.e., fun). It has no obvious relation to the real world and can't compete with a friend who comes up with a business deal to get a franchise and open a Planet Hollywood, or whatever is hot these days. And, often these "friends" (if they are even that) are utterly and totally incompetent to run anything.

sage

[yancem]

Technically EVERYONE who goes to college is trying to go PRO in SOMETHING. Colleges still don't educate on 401ks, how to do your taxes, or how to pick good advisors.

Make the school responsible for the failures of pro athletes and every unemployed college grad in the world is open to sue their alma maters....

It's been my contention for a long time that colleges (and high schools for that matter) should provide classes that teach the basics of personal finance. How many people coming out of school understand the nuances of financing a car or home. How about life insurance, health insurance, 401k's, IRA's or balancing a checkbook (I know this sounds simple but you would be surprised how many people don't know how to do it). Education shouldn't be just about grammar, math, science and history. The idea of getting an education is to prepare you to succeed in life. I would love to see a life skills/personal finance class(es) be required for all high school seniors (not everyone goes to college and even if they do it may be there first foray into personal responsibility). Colleges should then have more advanced classes for their students. These classes wouldn't necessarily be restricted to seniors but be part of the required curriculum so athletes that plan on leaving early could take them in their last year.

[dukeballboy88]

Follow one simple rule, make the money dont let it make you.

[JasonEvans]

It is worth noting in all this that the various pro leagues do have pension funds in an effort to ensure that players have something they can get in retirement. It varies greatly from league to league and your benefits are reduced if you try to take them sooner than 55 or 60. The NBA has a fairly generous one (Hockey is terrible, NFL is ok). Iverson, who played something like 15 years in the NBA, is probably looking at a pension benefit of around $100,000 per year once he turns 55. So, he's got that to look forward to.

MLB has a really generous pension plan, from what I understand. I believe a guy who plays 15 years in MLB would be in line to make around $140k per year once he turns 60.

The best though is the PGA Tour. Its pension plan is based on performance with bonuses for cuts made and earnings and stuff like that. I have heard that Tiger Woods will be in line to get more than a million dollars a year from his PGA Tour pension plan when he turns 60... of course, he will likely have earned well over a billion dollars at that point so I doubt the million a year will matter much to him. Even AI would have trouble throwing away the money Tiger has made (though a divorce !!!!HALF!!!! can eat into your bank account awful quick).

-Jason "my bet is that AI has some illiquid investments and is not totally broke, but he has serious cash flow issues right now" Evans

[Jderf]

-Jason "my bet is that AI has some illiquid investments and is not totally broke, but he has serious cash flow issues right now" Evans

Seems like a good assumption -- though a terrible nickname, to be honest. A little on the wordy side ;)

[hurleyfor3]

Another factor, which is not just a problem for athletes, is that portfolio management, or wealth management, is unbelievably dull, with no consumption elements (i.e., fun).

Run your hedge fund allocation at 30-40% like most of the bigger endowments do nowadays and try telling me it's dull. :D

[DukieInKansas]

It's been my contention for a long time that colleges (and high schools for that matter) should provide classes that teach the basics of personal finance. How many people coming out of school understand the nuances of financing a car or home. How about life insurance, health insurance, 401k's, IRA's or balancing a checkbook (I know this sounds simple but you would be surprised how many people don't know how to do it). Education shouldn't be just about grammar, math, science and history. The idea of getting an education is to prepare you to succeed in life. I would love to see a life skills/personal finance class(es) be required for all high school seniors (not everyone goes to college and even if they do it may be there first foray into personal responsibility). Colleges should then have more advanced classes for their students. These classes wouldn't necessarily be restricted to seniors but be part of the required curriculum so athletes that plan on leaving early could take them in their last year.

I agree that a course in high school is a great idea. My high school offered "Consumer Math" many years ago that taught some of these basics. I can still remember beomg amazed when my roommate, either Junior or Senior year at Duke, didn't know what to do when the balance on her bank statement didn't batch the balance in her check book on that day. She had never used the reconciliation form on the back of the bank statement since she wrote only a few checks and used ATM withdrawals to pay cash for most things so the balance always matched. She was a math major, so I just pointed out the form on the back and let her go from there.

Regarding pro athletes, it isn't always the business deals with friends that get them into trouble. Derrick Thomas of the kc chefs died pretty much broke, with 7 kids. He often went to a local jewelry store with "friends" and would spend thousands at a time to buy them things. My contention is that those folks, even if you have known them since high school, aren't truly friends.

[SupaDave]

Regarding pro athletes, it isn't always the business deals with friends that get them into trouble. Derrick Thomas of the kc chefs died pretty much broke, with 7 kids. He often went to a local jewelry store with "friends" and would spend thousands at a time to buy them things. My contention is that those folks, even if you have known them since high school, aren't truly friends.

Anything can happen...

http://www.cbssports.com/nfl/story/15951027/remember-ryan-leaf-a-useful-cautionary-tale-says-new-leaf

[snowdenscold]

Dennis Rodman apparently also in financial trouble:

http://latimesblogs.latimes.com/lanow/2012/03/allegedly-broke-and-ill-dennis-rodman-escapes-jail-time-for-now-.html

One of the sad/SMH parts:


Some of Rodman's financial hardships stem from having cashed out his NBA retirement for pennies on the dollar so he could pay back taxes owed to the state of California for 2002-03,

[moonpie23]

fast money in sometimes fast money out.....folks that have never had money and get it quickly sometimes can't keep spending habits in control..i've seen it on the entertainment biz side...