Professional athletes are among the most coveted clients for advisors – and present unique financial challenges that those athletes are typically ill-equipped to handle themselves. Paul Franklin leveraged his role as a high-school football coach to pursue a career serving those clients.
Franklin is a third-generation advisor with a passion for sports. He is a former college baseball player, high school football player and is in his 10th year as a high school football coach. That background led him to expand the family financial planning and advisory firm to the niche market of NFL, MLB and NBA players.
Franklin is principal of Washington, DC- based Franklin Capital Strategies and coordinates planning efforts for the firm’s clients in areas such as investments, risk management and estate planning. The firm serves small businesses, entrepreneurs and, most notably, professional athletes throughout the country. I interviewed Franklin by phone on April 17 to learn more about his growing advisory business serving professional athletes.
Transitioning the family firm
Before Franklin entered the financial services business he was regularly traveling the country attending coaching clinics at some of the top football universities. In addition, he was attending NFL scouting combines, week-long showcases where college football players perform physical and mental tests in front of NFL coaches, general managers and scouts, allowing them to evaluate upcoming prospects in a standardized setting.
Franklin transitioned from being a three-sport private high school coach and fundraiser to a career in financial services. He joined his family’s firm in 2009. Franklin started reading about the high percentages of players being led down the wrong financial path and going broke, and felt like he had a natural fit serving that market. Franklin decided to both expand the firm’s services to offer financial counseling to professional athletes and to open an office in the DC area where he resided, rather than continue commuting to the Cleveland home office.
Financial planning for professional athletes
The firm currently adds a couple of athletes each year, leveraging Franklin’s network of university coaches, trainers, existing athlete clients and agents. Franklin has good relationships with agents across all sports who refer business to him. Franklin and his team then follow up and meet with the athlete and their family. The goal is to make the meeting about the prospective athlete rather than the firm. Franklin said, “We really want to take all the time talking about them, and then just use a few different things to show why we're different, and why we can add value to that prospective athlete.”
At this point, 10% of his clients are athletes and he thinks his firm is “not even close to where it could be.” He tells his clients that he is their financial coach and, just like an athletic coach, “sometimes I'm going to tell you things that you don't want to hear. Sometimes I'm going to reaffirm things with positive reinforcement and tell you you're doing a good job. Other times I'm going to tell you need to fix some things.”
In addition to their professional athlete clients, Franklin provides financial planning and asset management services to both small business owners and entrepreneurs. As the relationships with their business clients have developed, it has successfully transitioned to the personal planning for these business owners and their families.
Franklin uses the same principles for both the firm’s athlete and non-athlete clients. The primary difference in managing their athlete clients is that the athlete’s time horizon to earn money is compressed into a short number of years. For clients who have just signed their first contract, the focus is on providing basic education on managing cash flow, budgeting, bank accounts, buying insurance, paying bills, understanding gross pay versus net pay and paying taxes. For these early-stage athlete clients, the firm keeps most of the money liquid in case the athlete gets cut, injured or has some other emergency.
Franklin said that “typically the first contract for a player is not extremely lucrative” and what they are really looking for is “that second big contract, which puts them in the money.” Once the second contract is signed they typically meet with the client to take stock of what their income is going to be and what their net worth is projected to be in the short, mid and long term. Franklin then asks questions “that are provoking the client to answer in a way that we can then dictate a strategy in terms of the amount of risk that they want to take.” They do this for both their athlete and non-athlete clients.
It is at this point with a veteran athlete that Franklin brings in the full advisory team, which includes a financial advisor, an insurance specialist, a CPA and legal counsel. Franklin said that “you need all of those advisors together working in conjunction for the greater good of the athlete and his or her family so that there's transparency, number one, but also number two, that there's checks and balances.”
The unique financial challenges facing professional athletes
What Franklin loves about his clientele is that everybody is a good fit for him and his firm. He knows that if it is not a good fit for either side, it's just not going to work. The firm does a very detailed job vetting its clients, especially athletes who get referred to them or who they prospectively look to serve. Franklin wants to make sure that it's not a one- to two-year time engagement, but a lifelong commitment.
Franklin often deals with athletes who are approached with investment opportunities. Whether it is a retail business, restaurant, brewery, venture capital opportunity or a share in a company, the idea is tossed back and forth among the advisory team. “Then we share the pros and cons with the athlete and his or her family,” he said, “and ultimately it's up to that client, to make that decision, but we will put forth very strongly our views on the positives and negatives.” They focus on traditional investing and risk management strategies as the best way to invest an athlete’s money, and they spend significant time and effort educating clients on the pros and cons of their recommendations with the goal of having the client take ownership of the decision. Franklin said that if the client is not willing to learn and does not take ownership of the decision, it “presents a tough situation down the road if all of a sudden they're 35 and now they want to learn about what they've been doing for the past 10, 15 years.”
I asked Franklin to compare financial knowledge of millennial athletes to non-athletes. Franklin said that his athlete clients have had less free time to educate themselves on personal and consumer finance topics. From a very young age, athletes have always been told where and when to be. Wake up at 6:00 am. Lift weights at 6:30. Fuel your body at 8:30. Go to practice at 1:00. Do your homework. Come back for practice at 6:00. Go to bed. A non-athlete millennial has a lot more flexibility with their time and more opportunity to educate themselves on personal and consumer finance topics.
In comparing today’s athletes to those of past generations, Franklin said “today’s athletes are very conservative and very wary” and, with the evolution of social media and the plethora of available information, they are much more aware of their brand and are “much more equipped and highly educated than the athletes of the 80s and 90s.”
Are athletes at a disadvantage when they quit college early to sign a professional sports contract? Most understand what they're getting into when they're leaving school early, Franklin said. “If you are a top-caliber athlete, clearly sports was your primary motivation to go to school, and if you are leaving early then your goal is to secure a contract so that you can be financially solvent.” To help athletes avoid spending excessively, Franklin focuses on the mantra of saving and investing first, and then thinking about buying a car or a house for mom later.
Another significant difference in managing athlete clients is the role of the advisor once the athlete retires from their sport. Franklin describes it as “a really touchy transition that a lot of athletes are scared to face” and it leaves the former athlete in a state of denial. For the bulk of their life athletes “have been given a blueprint in life. Then all of a sudden, the phone stops ringing, and you're now living off what you've made, and you need to preserve and grow that.”
Franklin is starting to see that athletes are much more focused on their off-field or off-court brand and said this is important because retirement rapidly creeps up on their athletic careers. During this transition, the advisory team’s relationship and role with the retired athlete client changes, as they now advise and coach their client on how to secure new career opportunities. They focus on coaching the athlete to manage their lives with more limited cash flows and helping with decisions such as should you rent rather than own, or should you live in a lower cost place like North Carolina rather than in New York City.
Franklin’s advice for landing athletes as clients
If you are an advisor and aspire to add professional athletes to your client list, Franklin recommends you do this only if you have a natural connection in that niche world as he did. It takes time, energy, and effort, but only a couple of good clients to get started. He warns that it is a “dog eat dog world” where his clients “are approached all the time, whether it's on the golf course, or in a restaurant, or in the locker room.” It is really important that to get along well with your clients, they fit your model and you fit their model, because you could wake up tomorrow and your client could go to another advisor, he said. For this reason Franklin recommends that you also pursue non-athlete clients where this type of competition and turnover does not exist.
Justin Kermond is the vice president of business development for Advisor Perspectives.
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Professional athletes are among the most coveted clients for advisors – and present unique financial challenges that those athletes are typically ill-equipped to handle themselves. Paul Franklin leveraged his role as a high-school football coach to pursue a career serving those clients.