Finding Your Niche Advisor

Hey, Derek Jeter: Don't blow all your money!

At a recent event, Derek Jeter said that 10 years from now he'd like to have a family. "I look forward to that," he added, "but I also want to be an owner of a team."

One can only imagine the number of baseball fans across America who would line up for tickets to see the house that Jeter, legendary and newly retired New York Yankees shortstop, might one day build. In the meantime, they can log onto The Players' Tribune, a new sports website Jeter's helping to bankroll as founding publisher. The site will be, in Jeter's own words, "a place where athletes have the tools they need to share what they really think and feel"—cutting out the sports reporter middleman.

Derek Jeter of the New York Yankees speaks to the media following his last career game at Fenway Park on September 28, 2014 in Boston.
Getty Images

The so-called "player-turned-owner" dynamic is certainly not a novel occurrence—or a necessarily successful one, at that. Great players certainly don't always translate into great owners, as demonstrated by the widely reported so-so experiences of the Mario Lemieuxs and Michael Jordans of the erstwhile player elite. Some financial experts think Jeter, who has earned a reported $400 million in salary and endorsement deals, should rethink making such a decision—a decision that could ultimately wipe him out.

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"Is the pursuit of that passion worth the risk of ruin?" asked certified financial planner Mark Cortazzo, senior partner at Macro Consulting Group. "Don't do something that will potentially jeopardize your needs being addressed in pursuit of your wants."

Good advice. Team ownership is essentially the same as investing in the most risky stock in the market. However, this is Derek Jeter we're talking about. The captain has made a career out of risky decisions. And telling Jeter otherwise may strike him as foolish.

Stacy Francis, certified financial planner and president and CEO of Francis Financial, thinks that an advisor should never say "no."

You can’t tell him that he can’t buy a team because that financial advisor will be fired. Instead, you have to figure out how to make it happen.
Stacy Francis
President and CEO of Francis Financial

Making Jeter's ownership dream come true will take careful financial planning.

His net worth is reported to be around $185 million, according to Cortazzo. Partial ownership, which would be the only option at this point, will be very expensive for him. A smart financial advisor would strongly suggest Jeter protect a good amount of his money against a potential catastrophic setback.

Tom Henske, certified financial planner and partner at Lenox Advisors, thinks Jeter needs to do three things in order to ensure a steady source of income, as well as protect his money for himself and his family in the long run.

"I would want him to have all his insurance squared away—meaning things like life insurance, for more estate tax reasons," Henske said. "Liability protection—he now has his nest-egg and I'd want to make sure he is protected from any potential lawsuits as he'll always be a target.

"And finally I would advise him to bifurcate his money," Henske said. "I would make sure he segments his money into two pots—money that's ridiculously safe and all the other money that he'll put in various investments and such."

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Money bifurcation provides a safety net in the event of loss of capital. If Jeter properly puts a portion of his money into something safe, the impact of another, bad investment would be minimized.

"I think the most important thing Derek Jeter should focus on is what the minimum standard of life or quality of life that he wants to ensure for the rest of his life [is]," said Cortazzo at Macro Consulting Group. "He should set up a very conservative pool of money to give him $2 million to $5 million a year for the rest of his life.

"Jeter should set something up that's very safe and very secure and boring that will generate that income for him," he added. "Then he could be aggressive with the rest of his portfolio."

Putting money into safe investments such as treasury bonds will ensure steady long-term growth. However, the key to a great portfolio is to ensure protection whatever the circumstances.

"Jeter should set up assets in some kind of trust outside his reach or control," Cortazzo said. "If he would ever get sued or declare bankruptcy, that asset wouldn't be attachable.

"He will then still have income coming out of bankruptcy," he said.

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All in all, an advisor should always keep one thing in mind: The client. Although Jeter has a considerable net worth, one unique quality sets him apart from all others—the fact that he's Derek Jeter.

"When you think about what his net worth is, his brand is likely worth as much, if not more, than his portfolio," said certified financial planner Barry Glassman, founder and president of Glassman Wealth Management.

Jeter's brand will likely play a positive role in his future endeavors. If he plays his game right, all he may have to do is be himself.

According to Cortazzo's calculations, if Jeter "is worth $200 million today at 40 years of age, 25 years from now, if his money grew at 6.65 percent a year, he will be worth $1 billion dollars by the time he turns 65."

—By Ike Ejiochi, special to CNBC.com