Why pro athletes need a financial plan, too

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Hockey player Reilly Smith says life as a professional athlete isn't like what you see on TV shows such as Ballers, with players blowing millions of dollars on luxury items such as boats, cars and homes.

There's some lavish spending, sure, but Mr. Smith, a Toronto native and right winger with the Vegas Golden Knights, says many athletes today work with financial advisers that help them manage their money for the long term.

"In professional sports, your career isn't going to be very long. That's what a lot of people have to understand. It's not like you're going to play professionally for 30 or 40 years. The window is probably eight-to-10 years, and that's considered a good career," says Mr. Smith, 26, who played for the Dallas Stars, Boston Bruins and Florida Panthers before joining the National Hockey League's Las Vegas team earlier this year.

"There's life after a hockey career and you have to be able to provide for yourself after, so saving is a huge thing."

The reverse earning curve

But saving and investing is a lot different for professional athletes, celebrities and anyone else who comes into sudden wealth early in their career. Instead of earning more as they age, it's usually the reverse. It's why professionals who earn the bulk of their money early in life are encouraged to be more conservative investors, to ensure the money lasts for decades.

"The main difference with athletes is the earning curve," says Brandon Hill, a certified financial planner, with The Player's Office, a Toronto-based wealth management firm focused on professional athletes.

"My goal is to create a wealth and investment strategy where they don't have to work again if they don't want to. Obviously, they'd go crazy retiring in their 30s and not doing anything, but financially they don't have to work and it allows them to do what they want to do and not worry about a salary."

Pro athletes need a financial enforcer

Mr. Hill and other advisers working with athletes see their role as financial enforcers, helping to build and protect their clients' wealth. Athletes can see their fortunes erode quickly through overspending (on themselves, friends and family), bad investments and costly divorce settlements. There have been numerous headlines about athletes and celebrities who lose millions – and even file for bankruptcy – due to mismanagement of their finances.

Mr. Hill says the strategy boils down to cash flow management, including setting aside money for a few perks such as a luxury car, nice house or recreational property.

"It's a fine line," Mr. Hill says. "These guys have worked so hard their entire life and probably sacrificed a lot growing up to get to this point…. They deserve to spend and live that luxurious lifestyle, but we also need to make sure they have a comfortable lifestyle for the rest of their life, not just during their playing years."

While a conservative investment approach is often called for, each athlete is different depending on where they are in their career, their financial goals, and type of contract they have, which will influence the appropriate asset mix, says Bob McKee, a private banker for sports professionals at RBC Wealth Management in Vancouver.

"Emerging players will tend to lean towards a growth portfolio that is constructed with very high quality, largely dividend-paying stocks, fixed income and avoiding speculative products," says Mr. McKee, who works with a lot of professional hockey players, coaches, management and agents. "As their career advances, we often see a trend to a more conservative portfolio with less allocation to stocks and more of a balanced approach between stocks, bonds and cash."

Mr. McKee says athletes are also often targets of people looking to raise money for various ventures, including from family and friends.

While there are some good investment opportunities, "we are the bad guys when no should be no," says Mr. McKee. "We want to make sure the athlete can be as successful as possible in their career and has something to show for it afterward."

'The money doesn't last forever'

Money management and saving for life after hockey is something Mr. Smith's parents taught him as he rose through the ranks early in his professional career. He's also learned from watching his older brother, Brendan Smith, who plays for the New York Rangers.

"I got to see everything he went through a couple years before me," says the younger Mr. Smith, who has a diversified portfolio and owns a vacation property on Canada's East Coast as well as a condo in Florida.

"The key is to not overextend yourself. The money doesn't last forever. You have to be smart and plan for the future."

Special to The Globe and Mail