Sports stars need special treatment off the field too
Australiansporting rewards may not match those of the top American basketball player who earned nearly $45 million last season — our best cricket and football players are lucky to make more than $1 million annually — but the successful can still reap big rewards.
However sports stars — except those in certain sports, such as golf — have a very short period to earn large sums. Some may enjoy benefits down the line through media contracts or speaking circuit engagements, but most need to capitalise on their earning capacity immediately.
Many have sacrificed their education to pursue sporting careers while others have been so obsessed with their sporting ambitions they have fallen behind in their non-sporting careers.
Yet others can be so seduced by the adulation and publicity that they imagine the good times will last forever.
A lack of planning for superannuation during these peak performance years can leave many athletes with a big hole in their retirement savings. As they have no employer, they are ultimately responsible for their own wellbeing.
All of which adds up to the fact that sporting identities require special and dedicated attention from financial planners during that brief window when they are earning big money.
Therefore the aim of the financial planner working with sporting identities must be to ensure that the client has sufficient funds at the end of his/her career to provide for a new career, a business, further education or perhaps even early retirement.
The task from the planner’s position is bedevilled by the fact that unlike normal employees, most sporting people do not receive a regular pay packet. They receive much larger sums, but on an irregular basis.
The sporting star, because of his/her high profile, can also often be targeted by opportunists with dubious motives, offering investments of doubtful calibre and pedigree. The financial planner must be prepared to act as an adviser on new business opportunities, and have a sufficient network in place to obtain additional advice.
All of these impose upon the financial planner a much tighter discipline regarding communication, whether it be written or oral. Communication needs to be brief and clear, with the minimum of jargon.
Effective tax planning is also essential. When working with a sports star, we usually sit down and go through some tax planning before year-end to examine the tax position, cash flow and tax opportunities such as superannuation and the ability to average income. Tax structuring and advice plays an integral role in ensuring the athlete will be successful both on and off the field.
The adviser needs to formulate the strategy and oversee the fruits of the client’s labour. Where the coach’s goal may be an Olympic gold, that of the financial planner may be simply the client buying their first home.
Aaron Dunn is an accountantand tax specialist with theSnowball Group . His clientbase includes many well-known sporting stars.
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