It is difficult for most people to imagine, but many of our favorite professional athletes and entertainers will file bankruptcy once their careers are over. Pro athletes, actors, musicians and other high-earning individuals become accustomed to a certain lifestyle during their period of high-earnings, only to see the wealth expire as their income quickly decreases.
Lee Rawiszer, Managing Principal at Paradigm Financial Partners in Westport, Connecticut, and Brandon Steiner, speaker, author and CEO of Steiner Sports, are united in their common passion for helping professional athletes and entertainers protect their wealth. Rawiszer helps individuals establish a long-term financial plan that creates income and supports the client’s current lifestyle long after their period of extreme earning is over – a process he calls “irreplaceable capital”. Steiner, who owns one of the leading sports memorabilia companies in the country, partners with athletes to create brands that will last and create long-term earnings potential.
Lee and Brandon sat down to discuss why they are so passionate about working to lessen the overall risk to the financial futures of professional athletes and entertainers.
Q: What are some of the unique challenges facing professional athletes and entertainers in today’s celebrity-obsessed culture?
Rawiszer: Noise! Professional athletes and entertainers get approached from so many different professionals, promoters, agents, individuals who are touting their investment schemes and family members asking for help, they don’t always know who to turn to. They also get caught up in the sudden wealth, thinking their lavish lifestyle is a permanent way of life, never imaging an injury, poor performance and/or bad investments can take it all away.
Steiner: Most people today have the same problem and it’s sorting through all of the risk out there and trying to determine what’s real, what’s authentic and what’s just coming and going. The challenge that people face, particularly professional athletes or entertainers, is creating a strategy that builds a sustainable brand rather than just making quick money. A brand will last much longer than your career and help provide wealth long after your playing days are over. You really have to think long-term and that’s where a lot of the athletes get into trouble.
Q: How do some of these challenges differ from working with other high-net-worth individuals?
Rawiszer: High-net-worth entrepreneurs or professionals in other industries have a longer income arch that can continue 30-40 years, where the average career playing professional sports lasts 3-5 years or maybe longer if they are talented and fortunate enough to stay healthy.
Steiner: Athletes are busy people. They are being pulled in many different directions because they are high-profile and everyone knows them. They live in a fast-paced environment and that environment is what got them to the peak of their sport. With that said, you have to get them to slow down and think of the bigger picture, so you can build long-lasting wealth. High-net-worth individuals actually face a lot of the same challenges.
Q: What is the best way to educate these individuals about potential pitfalls?
Rawiszer: Mentoring. We try to educate professional athletes and entertainers about the risks they face by using real life examples of the heroes they want to emulate. We frequently talk about our own clients who have failed despite our best efforts to put them on the path to financial success and try to show them how they can be different by making smart choices. We’ve used a mentoring program with the athletes we work with because putting them in touch with those who have been through it before, signed a big contract and dealt with all of the expectations has a tremendous impact. We have used athletes who were successful and bucked the trend or former athletes who made mistakes and paid a heavy price. Both work well and make a huge difference in getting through to athletes or entertainers who are just starting their careers.
Steiner: The best way to educate these individuals is to show them very strategic and specific examples of people who did not follow a strategic plan and lost it all. You don’t need flow charts or statistics, but real world examples of people who didn’t succeed when it came to building their wealth. They are everywhere and the right story is worth a thousand words. Secondly, I always like to say that athletes don’t know what they don’t know. For that reason, it’s important that they surround themselves with individuals and professionals who can help them plan for their futures in the right way.
Q: What do you see as being the biggest obstacle to helping protect the financial futures of professional athletes and entertainers?
Rawiszer: In the professional athlete’s case, risk of injury, bad financial decisions, bad influences, drugs and bad marriages are the obstacles we see on a regular basis. For the entertainer, it is usually falling out of favor with the public. How many one hit wonders have we seen? Someone is on top for a while and then disappears, such as Vanilla Ice. Poor financial decisions can also get entertainers in trouble the same way they do athletes. Both face similar challenges, but the pro athlete’s career has a finite window where they only have a couple of years to perform. It’s possible to have a much longer career as an entertainer. Paul McCartney, who is still selling out arenas at the age of 72, is a great example. He is an exception of course, but it is possible to have a career that spans decades as a musician or entertainer.
Steiner: The biggest obstacle is getting celebrities to realize that the faucet from which money flows will at some point turn off. With all the money they make, they need to be convinced to put money aside to maintain their wealth long-term. There is “get rich money” and “stay rich money”. Athletes and celebrities need to put the stay rich money aside and not touch it, no matter who calls or how sexy a business proposition sounds. People will always come to you because of your money, but you never want to mess with that.
Q: How did you become so passionate about working with this particular demographic?
Rawiszer: We really strive to and enjoy making a difference in the lives of our clients by helping them avoid falling prey to some of the statistics that are out there. We do this through education and truly caring about their financial well-being. We want to reverse the stats and prevent these gifted athletes from making poor decisions and going bankrupt. Truly making a difference in the lives we touch is a goal of everyone on our team. It’s a challenge because some individuals don’t want to listen to the stories and statistics, but when you are successful and you can get through to them it is all worth it.
Steiner: My passion for working with athletes really started in college when my roommate was a Division I football player. When you are an entrepreneur, you look for a problem in the world and think about how you can come up with a solution. Back in the late 1980s and early 1990s athletes were really struggling to market themselves and build their brand. I thought there was a natural fit for me to help in this area and I have been fortunate to be successful in partnering with them to create a sustainable brand.
Q: What are some simple steps pro athletes or entertainers can take to make sure their finances are in order?
Rawiszer: For starters, I recommend that they have a solid team behind them and be and stay involved!! Delegate to a point, but understand what is happening with your money and the elements that go into your financial future. Be involved in the decisions by educating yourself about your finances. It’s very important that you don’t have blinders on and live in a way that only focuses on today. Think about the future during and after your career ends.
Steiner: It depends on the level of athlete we’re talking about here, but speaking generally, it’s really important that athletes and entertainers have an understanding of the difference between get rich money and stay rich money because there really is a huge difference. Secondly, I recommend having someone who has no skin in the game act as your financial advisor. You want to find someone who cares about you and only you and can make sure you understand what you are getting into and what you need to avoid from an investment and business standpoint. The right partner in this area can make all of the difference in the world.
Q: What is one piece of advice you would give to someone who was just drafted by a NFL or NBA team or signed their first record deal?
Rawiszer: Get yourself a strong team that includes a financial advisor and business manager. Interview many and find individuals who you can trust and who will strive to put your interests first. I cannot stress this enough.
Steiner: First, I always tell the athletes I work with to live on the money they made last year – not the money they are going to make this year or what they think they will make. Don’t spend beyond your means. Secondly, save first and spend later. Just because you have the means to go out and buy a lot of really nice things now, doesn’t mean you should. Save your money. You can always buy things later. Its sounds really simple, but it’s the best advice I can give.
Q: What can the average American learn from the financial struggles of some of their favorite athletes and celebrities?
Rawiszer: I think a key message for anyone to learn is that you cannot just live for today and disregard your future. It can all end at any given time – for all of us. As is the case with professional athletes and entertainers, you want your money to work for you and if you invest your assets the right way, it can last a lifetime. Be wary of get rich quick schemes and charlatans.
Steiner: An important lesson I’ve learned is you need to have a fallback. For those who are fortunate enough to play a professional sport or be in movies that is an amazing opportunity, but you must have a plan B. It’s important to have a second career plan or trade that you can fall back on once it’s all over. I’ve worked with a lot of athletes who, with a little effort and hard work, would be just as good at a second career as they were as an athlete. I think we can all learn from that. In my case, I always knew I was going to be an entrepreneur, but it was important to me to have a back-up plan. When I was younger, I was learning to be a chef and I’ve always viewed working in the restaurant industry as my plan B in case my current career path didn’t work out. People always need to eat, right?