Times have changed. As the No. 1 pick in the 2016 NBA draft, Ben Simmons will earn an annual salary of approximately $6 million — double that earned by David Robinson, the first player drafted in 1987, the year I was selected by the Cleveland Cavaliers.
While times have indeed changed, they also remain the same.
At last look, an estimated 60 percent of former NBA players go broke within five years of departing the league. And by no means are these financial problems confined to the NBA. A reported 78 percent of former NFL players have gone bankrupt or under financial stress just two years after retirement.
As the salaries of professional athletes across all sports grow larger, so, too, does the number of individuals seeking to prey on their successes and wealth. The reality is, athletes are targets the day they sign those contracts.
During my 16-year NBA career, I saw newly retired teammates lose everything to financial schemes and scams, dishonest or unqualified advisors, and reckless spending only a few years after leaving the league. Since starting a second career as a financial advisor more than a decade ago, I've seen this storyline repeat itself again and again — with high-net worth individual investors, as well.
Not a month goes by without seeing a headline describing the latest riches-to-rags story in professional sport.
For most athletes, there is no easy fix for a significant financial setback. Unlike virtually every other profession out there, an athlete's career earnings are compressed into just a handful of years. Time is not on the side of those who are undisciplined, unrealistic or too trusting. Careers are short, and savings must last for the rest of your life. Beating the odds requires a lot of work and discipline.
As we are in the midst of various draft seasons, here are some guidelines to offer new athletes and high-net-worth individuals that may help improve their journeys:
It's your money — own it. Athletes in their prime earning years can develop a detachment from their own money. Since so much is coming in so quickly, suddenly few purchases require more than a moment's consideration, so money stops being a real concern and becomes just a bunch of numbers on paper — until it's gone.
It's essential that high-net-worth individuals realize the tenuousness of their situations and just how vulnerable they are, even if they have advisors in place. Taking ownership of their money and keeping constant track of what their advisors are doing with it is the first step toward security.
Preserving capital can be as hard as obtaining it. Though we've become accustomed to the likes of Michael Jordan and Michael Strahan settling into second careers as endorsers, TV personalities and even team owners, most athletes won't be so lucky.
The simple truth is they won't have the opportunity to make money like this again. That's difficult for a young person to recognize when in the midst of living a dream. There are so many ways it can disappear: friends, family, lifestyle and constant pitches for can't-miss opportunities.
Athletes, as well as other high-net-worth individuals, must not only save — but also invest wisely — all while navigating the minefield of people looking to take advantage of them, because there likely won't be more coming in.
Risk and return are forever linked. High-profile clients are bombarded by constant pitches for potential business "opportunities" — often by trusted sources (I probably got pitched a "once in a lifetime" opportunity every month). It's important to realize that if a proposal sounds too good to be true, it probably is. Anything offering a great return likely does so for a reason — usually, drastically increased risk.
Fees matter. As an individual investor, take the time to speak with your financial advisor to ensure that you are being kept abreast of everything that happens with your money. Small, unnecessary fees can easily be ignored in the moment but can make a big difference over time. Take the time to understand all the fees involved with a product or service.
For the overall portfolio, the fee conversation can be broader, but it's nonetheless important to break down exactly what your advisor is charging and why. This builds trust and reinforces the importance of keeping track of such matters.
Don't worry about what your teammates are invested in or how they live. I like to call this one "the MTV Cribs rule." Others may prefer "keeping up with the Joneses." We all feel that pressure to keep up with our neighbors. However, for professional athletes it's even more acute. Their salaries are public information, so there's an expectation that they maintain a certain lifestyle. And they're often surrounded by conspicuous spending.
However, clients must understand that they aren't living off one year's salary for just a year, like most people do. That one year of big pay often has to last for 60 years. Establishing sustainable long-term spending practices and settling into a manageable lifestyle is of the utmost importance.
The likelihood of an NCAA basketball player getting drafted by an NBA team hovers around 1 percent, which underscores the tremendous amount of skill, sacrifice, talent and determination it takes to make it. Even after overcoming these incredible odds, life after the NBA arrives much sooner than expected — the average career spans less than five years (and is even shorter in other major sports).
Despite these startling statistics, the hard work doesn't end when the ball stops bouncing. Financially, it's only just begun.
— By Chris Dudley, senior wealth advisor/director of sports and entertainment at Boston Private Wealth