When Should I Start Looking for Specialized Wealth Advice?

Many young athletes don't seek out a financial team until after making their first fortune.

After all, why would you need investment advice before you have money to invest?

The truth is that without professional guidance, you run the risk of making financial decisions that could negatively affect the rest of your career and life.

You may not have much financial capital, but you do have an incredible amount of human capital. That's the biggest driver of your future net worth, and it has very little to do with investments.

Working with specialized wealth advisors early in your career significantly impacts your ability to leverage that human capital into true financial independence.

You'll see a real-life example to illustrate this in the case study below. We demonstrate how we helped a player on the brink of his MLB debut avoid costly wealth-compromising mistakes and optimize his wealth throughout his career.  

But before that, why family offices like AWM are uniquely qualified to help you maximize your future net worth – even before you hit the big leagues.

Why Should I Speak with a Family Office at This Stage of My Career?

Usually, professional athletes will seek the help of a specialized investment firm or wealth advisor only after they have money to invest.

But what about young athletes that haven't made millions in the draft but have a lot of complex financial decisions on the horizon?

Can they still benefit from the services that a family office can provide?

I can answer that question by defining what a family office is and what it offers.

A family office approaches wealth management from a holistic perspective, organizing every aspect of a wealthy individual's or family's finances for long-term wealth optimization.

They employ a team of experts across various financial disciplines and offer unbiased wealth advice and wealth management services. With a family office, you don't just hire someone to manage your investments -- you hire a specialized team of professionals working together in your best interest.

Family offices provide many services outside of traditional investments that have a significant impact on a clients' net worth, including:

• Specialized tax planning strategies.

• Financial education and guidance.

• Legal advice and estate planning (setting up wills, family trusts, property transfers, etc.).

• Unbiased investment advice from independent advisors.

• Protection from making wealth-compromising mistakes, such as reckless spending, inappropriate investments, poor tax planning, or inadequate insurance.

At AWM, we regularly carry out these tasks for athletes and their families.  

Whether it's helping a client establish residency properly, evaluating the structure and tax implications of a signing bonus, or analyzing offers from companies like X10 Capital, Big League Advance, or Rockfence Capital, we deliver expert advice that impacts our clients well before they have accumulated a large amount of capital.

Why is a Family Office Best Qualified To Advise Professional Athletes?

With their mass advertising and thousands of agents worldwide, you can probably name all the big financial consultancies and management firms operating on Wall Street.

Unfortunately, these firms are not qualified to manage your finances.

While Wall Street firms and broker-dealers would love to have your business and sell you their products, they do not possess the expertise to help you in your particular situation.

In fact, there are relatively few firms and consultants with the relevant skills needed to understand the complexities of your life and career as a high-earning athlete, whether that's strategies for minimizing jock tax or evaluating private investments and business opportunities.

Not all family offices are equipped to help you either.

While most family offices are adept at working with wealthy clients, their services are not geared to or aligned with working with professional athletes on the brink of success. They don't specialize in working with athletes – nor do they take on clients who haven't yet accumulated large amounts of wealth.

Because of this, I can confidently say that AWM Capital is one of the most qualified family offices for athletes. Our specialized financial teams are helping MLB, NFL, and PGA players maximize their human capital from pre-career to post-retirement.

The Benefits of Early Wealth Planning With AWM Capital

We often get asked the following questions:

"Why should I talk to you now before I have played my first major game?"

"Shouldn't I just wait until I have some money to invest before I start interviewing family offices?"

We understand where these questions are coming from. They mirror a lot of the same questions that we get from amateurs approaching the MLB Draft or thinking about joining the NFL.

Our answer will always be the same:

We believe that you have the opportunity to earn $35,000,000 or more in your career.  

You need a specific team of experts to help you navigate your career. Our goal is to educate you so that you understand the financial implications of your choices.

It has been our experience that the earlier you start to educate yourself on the differences between traditional financial advisors and family offices, the more likely you are to be to make the right decision and hire the team of experts that you need.

To illustrate this point, let's look at a case study of a young baseball player that we advised some years ago.

A Case Study on the MiLB to MLB Transition

Nine years ago, AWM Capital sat down at lunch with a 25-year-old AAA pitcher and his wife.

This couple had less than $5,000 in their bank account and were saddled with student loans, car loans, and credit card debt.

The pitcher had been drafted and signed out of college for less than $100,000.

As a family, they were in a position where they did not have any investments that traditional financial advisors would be able to advise on, and no family offices were reaching out to help.  

The couple realized the young pitcher was on the verge of making his MLB Debut, and their life was about to become more complex. They wanted to prepare for these changes correctly.

Within a few months of working with AWM, this athlete made his MLB debut. He went from being in the lowest tax bracket to being in the highest overnight. They went from having nothing to protect to having potential liability in every financial realm of their lives.

Of course, he didn't want to worry about this while focusing on making his MLB Debut.

But he didn't have to; AWM was behind the scenes taking care of everything that needed to be addressed, including:

• Coordinating tax withholdings.

• Filling out forms and understanding the MLB Vanguard 401k paperwork.

• Navigating the MLB health insurance systems.

• Educating them on the MLB pension system.

AWM made sure that this couple received expert advice to address these newfound complexities that did not exist in the weeks before their MLB Debut.

During that first year, in addition to the paperwork mentioned above, AWM helped them:

• Pay off student loans, car loans, and credit cards.

• Eliminate all unnecessary taxes and file taxes in 13 states.
• Purchase their first home, with services including:
  • Assisting in identifying the right real estate agent.
  • Helping coordinate their mortgage (which is not always easy).
  • Setting up the proper homeowners, auto, and umbrella insurance policies.

• Set up an Individual 401k retirement plan for his 1099 off-the-field income.

Over the next eight years, we have helped them daily to:

• Set monthly spending plans and budgets to optimize savings.

• Protect future income with disability insurance.

• Welcome children who necessitated estate planning (setting up a family trust, wills, etc.) and saving for college.

• Worked hand in hand with his agent to structure his playing contracts to maximize after-tax earnings.

• Created an LLC to purchase investment real estate.

• Set up a Donor Advised Fund for charitable giving (an advanced tax planning strategy).

• Provided access to and coordinated an investment in one of the top 10 venture capital funds.

• Coordinated the private purchase of over 500 acres of land and the building of their dream home.

• Coordinated a grass lease and cattle contract on their land.

• Paid off all of their parents' debt.

• Set aside college money for all of their nieces and nephews.

• Started a financial education program for their kids.

• Helped plan a financial strategy for career earnings that will likely exceed $300,000,000.

• Analyzed an X10 deal and the NPV that it represented.

As you can see, a potential MLB athlete – and any athlete with a high level of human capital – faces incredibly complex financial decisions long before they get drafted.

This family realized the depth of expertise they needed before having any "real" money. They hired a team of experts before any mistakes were made, which empowered them to achieve their long-term vision as a family.

If the above scenario resonates with you, or you know that you have a wealth of untapped human capital on the brink of being realized, get in touch with us today.

Article by Will McGuffey, CFP® - Private Wealth Advisor at AWM Capital, Licensed Attorney

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