This publication has interviewed the head of wealth management at Brown Shipley about the issues of sports wealth planning.
Brown Shipley’s head of wealth management has said that it is vital that wealth managers interact early with sports stars, their families and advisors to build discipline around financial planning and avoid costly errors down the line.
With individuals from the world of sport - not just players - seen as an important growth market for wealth management businesses, this publication spoke to Roger Clark about the various issues when managing sports stars’ wealth including the importance of education and interaction with clients.
“These individuals inhabit a professional environment where high spending is often the norm and the understandable tendency is to follow that trend at the earliest opportunity,” said Clark. “They are also often presented with investment opportunities offering a combination of tax mitigation and relatively high investment returns which may seem too good to be true for a reason. As such, it is vital that wealth managers have direct interaction with sports stars, their families and close advisers at an early stage in their careers if one is to establish a disciplined approach to financial management – an essential quality for those with careers of limited longevity.”
The UK wealth manager is not new to the area of sports wealth planning, and in August, as reported by this publication, it signed an enhanced and extended two-year sponsorship deal with Lancashire County Cricket Club to become its official wealth management partner.
Clark, who joined the firm in 2014, said: “There is currently a good deal of financial education which takes place at sports clubs and academies across the country. However, more can still be done. Financial organisations should be prepared to invest in the future of existing and potential sports clients. This in turn will be an investment into their own future as they develop mutually beneficial relationships which may expand across teams and different sporting disciplines.”
Sports clients may have the same ambitions with their wealth planning as standard high net worth clients, but their situation does differ, as sports stars have a smaller time span to earn their fortune. For example, according to the Guardian in 2010, the average duration of a footballer’s playing career is eight years. Therefore sports clients do not have long to invest their money as the influx of wealth starts decreasing by the time they get to 30.
Brown Shipley's Clark also discussed the differences between sports clients and standard clients.
“Much is made of the complexity of the financial arrangements surrounding many of our top sports people,” said Clark. The level of complexity is heavily influenced by their nationality, the source of their income and the impact of UK tax legislation on that income. While all of this may influence the use of certain structures to receive and distribute income, there are otherwise only two principal differences between a sports star and any other high net worth individual, he said.
Clark, who is based in the firm’s London office, added: “Firstly, the significant levels of income for a potentially shorter earnings span than usual, and secondly, the lack of high earnings scope for the future from a relatively young age. Most of the time financial guidance and advice covers the same core issues: protection for the client and their families, estate planning and investment and pension advice for a long period of `retirement', although understandably this may be some years into the future. The drafting of wills is often neglected, particularly at a young age, but is of significant importance, particularly for those with young families to consider.”
Brown Shipley's website guides wealth managers dealing with sports stars' financial affairs, including ideas such as planning, use of allowances, tax; debt and understanding of investments.
Sports wealth planning is starting to become a mainstream segment within the wealth management industry, as more money is pumped into the world of football, tennis, Formula 1 and rugby. This publication has spoken to various institutions on the subject, including Kleinwort Hambros, RBC Wealth Management and Coutts.
And Clark believes that financial institutions need to invest in sports clients in a bid to improve its clientele and grow as a firm.
"Financial organisations should be prepared to invest in the future of existing and potential sports clients," Clark added. "This in turn will be an investment into their own future as they develop mutually beneficial relationships which may expand across teams and different sporting disciplines."