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OPINION OF THE WEEK: The Sporting Life And Wealth Management

Tom Burroughes

22 April 2024

Switzerland might not host Formula 1 motor racing (the country voted to ban it in the mid-50s after an horrific accident at Le Mans, France) but in most other countries with wealth hotspots, people are happy to put on a show. There’s racing in Monaco, Bahrain and Singapore, to give three examples. (Singapore is a relative newcomer to the sport.) And private banks such as (F1 global sponsor) take notice. 

If races are taking place in or near financial hubs, and project glamour, competitiveness, engineering brilliance and courage, then banks and others want that reflected glory. This explains why large sums are being spent. And this isn't just about motorsport. Across a whole range of sports, there is a lot of involvement from the banking and investment world, on a variety of levels. A question is what the return on investment amounts to.

I thought about this question after my recent trip to Dubai. There was a PGA golf tournament going on. The Abu Dhabi Grand Prix takes place this coming weekend. The ATP tennis tournament took place in Dubai from February to March this year. During the cooler months in the Gulf, many European/North American summer sports hit town.

Banks’ sponsorship of players and teams has been going on for some time, and their arrival in sport is also part of a culture shift – sports sponsorship is less "laddish," for want of a better term. Gone are the days when tobacco brands such as Marlboro or John Player Special were plastered on the side of cars. Cigarettes and scantily-clad pit women are out, wristwatches, crypto exchanges (well, not for long maybe) and airlines are in. A wholesome image is all across sport: stars who cheat can be swiftly cast off (as happened when Nike offloaded disgraced cyclist Lance Armstrong.) As sport grows more global, cultural sensibilities will mould the kind of sponsorship that’s acceptable, and the conduct of individual sportsmen and women. This can also bring some reputational management challenges that banks must consider if they back an individual.

These sponsorships can make sporting icons rich, minting a specific line of HNW individuals that banks themselves court as clients. Roger Federer was a global ambassador for Credit Suisse for years: this has shifted to UBS following the Credit Suisse takeover by its Swiss rival in March. It is not hard to guess where he keeps some of his money. Turning to golf – which has an aspirational image which aligns with wealth management – there are cases of, say, top 100 professional golfer Graeme McDowall, who is a brand ambassador for sponsors Liverpool FC, in part because the UK-listed bank earns so much revenue in Asia-Pacific, a region that has fallen in love with the English Premier League. Go to any bar in Singapore’s waterfront, for example, and the chances are that an EPL match might be on at certain times of the week. 

The “brand value” of sponsorship is difficult to measure, but some of the sums involved suggest that firms clearly think it’s worth it. According to a 2023 report from GlobalData, there are 1,385 deals between sports rights' holders and the financial services (FS)-payment sector, with these deals estimated as having an annual worth of about $2.5 billion. (The FS classification doesn’t necessarily include private banking, so the size is undoubtedly larger.) FS firms and brands identified in the report include MasterCard; . 

Private bankers can take clients to sports events, of course (obtaining a ticket for the Monaco Grand Prix will often cement a relationship) although firms must be careful about corporate hospitality to avoid breaching bribery rules, etc. Getting sports stars and managers to visit a bank and meet staff can also, perhaps, be a morale-booster for a workforce. A point to consider is that some former sportsmen and women find careers in wealth management.

The sports-wealth nexus also raises another opportunity: sports teams/tournaments can make money, particularly when TV advertising revenues and subscriptions apply. The alternative investment specialist research firm Preqin has noted that private equity, for example, is keen on the space. Take F1: In 2005, Bernie Ecclestone sold his stake in the F1 organisation to CVC Capital Partners for $1.7 bilion and, in 2017, Liberty Media acquired it for $4.6 billion. Interest in F1 has been closely linked to TV. The 2019 series from Netflix, Drive To Survive, was a big booster. Preqin noted that according to Nielsen Sports, the TV show's audience has grown by 73 million in F1’s top 10 territories. 

Private equity investment, particularly if leverage is involved, has its risks, however. Manchester United fans will bend one’s ear over the leveraged buyout 20 years ago of the famous English club by the US-based Glazer family, a process that arguably meant that the club was starved of sufficient investment to sustain the heritage set by the likes of Matt Busby, Bobby Charlton, George Best and later, Alex Ferguson. Against that, pension funds, and others, have put money into the beautiful game, such as in the case of English second-tier club Ipswich Town (full disclosure: I support “The Blues.”)

So, from the point of view of using sport to promote a brand or investing in sport to make money (and have fun), the crossover between these sectors remains a fascinating one. There are risks, and changing fashions, politics and geopolitics cannot be ignored. But in a business as focused on competition, excellence and hard work as wealth management should be, it makes sense that sport is often involved.