It is fair to say that money draws criminals like honey draws flies! And, in professional sports, there is a lot of money flowing around, which makes it extremely attractive and lucrative for potential financial fraudsters. Professional athletes have traditionally been targeted by fraudsters and a sizeable percentage of them end up as victims of investment fraud or financial scams. The global sports business and professional players’ salaries are increasing in value, year by year, and so do financial fraudsters. The revenues of professional athletes nowadays are growing fast due to huge sponsorship/endorsement deals, and a lot of financial predators out there want a piece of the action.
The steps outlined below, which are simple and easy to follow, can help professional athletes protect themselves from being victimized by financial mismanagement and investment fraud.
- First and foremost, it is imperative that professional athletes do not hand over control of their finances to anyone! And when we say anyone, we mean anyone and that includes parents, siblings, friends, agents, etc. Financial advisors should not be relatives or close friends. Personal relationships cloud money matters and may lead to feelings of entitlement to the money involved.
- Athletes should devote some time and do their homework on the recommended investments. They should be in a position to evaluate the basics of an investment opportunity starting with whether such an investment and its expected return make sense.
- Athletes should invest in teams of advisors who are backed up by well established firms, since these types of firms impose and enforce strict and continuing compliance standards and ethics training upon their employee advisors.
- Even when the financial advisor comes from a reputable firm, the athlete should still do some checking on the individual advisor. A basic check on the financial advisor can be done by contacting the Regulatory Authority which granted the advisor the relevant financial services license to see if there are any grievances or complains against him/her.
- Athletes should always seek referrals for their prospective financial advisor, especially from people who have been working with him/her for a number of years because it may take a few years for the consequences of financial mismanagement and/or fraud to surface.
- Many financial planners, investment bankers and other financial professionals often work on commission. That means they only get paid if the athlete invests in what they recommend, and they may not always give the best advice or have the athlete’s best interest in mind.
- The financial advisor should be willing to spend the necessary time to educate the athlete client on the basics of whatever investment he/she proposes and answer questions on how the athlete’s money is invested, what is the expected return on the investment and what is the worst case scenario if the particular investment goes sour.
- Athletes can build a protection firewall by requesting frequent and regular updates on their financial position and the status of their investments. If, for example, an athlete requires bimonthly meetings with his team of advisors where the financial advisor presents to the whole team the current financial position of the athlete vis-à-vis the previous one and reports on the happenings between the current and the previous period, it leaves very little room, if any, for financial fraud to take place.
- And finally, athletes should have their guard on with retired sports players who have been recruited by investment advisors to act as liaisons in getting players to participate in investment schemes initiated or favored by the investment advisor they work with. The perpetrators of financial scams tend to employ and use retired athletes as bait to lure active players into investing in such schemes.
Professional athletes should remember that their advisors just serve the purpose of informing them about all their available options but the financial decisions are ultimately their own. They need to be aware that promises of huge investment returns are a warning sign of a financial scam. There is no such thing as a “free lunch” and this is something to always remember!
For more information on how athletes can shield themselves from potential financial scams and investment fraud you may get in touch with us at [email protected]