The Evolving Athlete and Entertainer
The article below is from our BRIEFINGS newsletter of 06 May 2019
Today’s athletes and entertainers are increasingly taking on a secondary title: entrepreneur. We spoke with Goldman Sachs’ Nicole Pullen Ross and DeDe Agar, who run the firm’s newly launched Sports and Entertainment Solutions (SES), about why athletes and entertainers’ second careers and rising salaries can complicate their financial lives.
What changes have you seen in the financial profiles of today’s athletes and entertainers?
Nicole Pullen Ross: Modern athletes and celebrities are known for far more than their athletic prowess or their artistic abilities. For many of these individuals, their interests, identities and work go beyond their professions. For example, in a discussion with our CEO David Solomon, Philadelphia 76ers guard JJ Redick said as much, saying that: “You can really actually have a whole other career.” After hanging up their jerseys, some athletes, for example, go on to start fashion labels or foundations, while others invest in tech startups or other business opportunities.
DeDe Agar: The advent of social media and the “influencer” culture have also accelerated this trend since athletes and entertainers can often amplify their pursuits and personal brands on these platforms. In fact, many athletes are using social media to their advantage to build their identities and to monetize them, especially when they’re at the peak of their earnings power.
NPR: The increased visibility can, however, be a double-edged sword. Fame and reputations on social media can be fleeting and can come at a financial price. Athletes, for example, claimed losses from fraud amounting to almost $500 million between 2004 and 2017, according to a recent report by Ernst & Young. That’s why individuals in the spotlight have to ensure that those around them – their advisors, business managers and agents – have their best interests at heart, while equipping them to feel confident learning about and discussing their wealth. Last fall, for example, we created a financial fitness “playbook” for a major sports league to help educate its players about financial planning topics.
What were some of the reasons behind launching SES?
NPR: Whether your career lasts 10 years or 40 years, planning for the end game is the same. And time is of the essence with this population. Many sports figures make the bulk of their wealth in the first 10 to 20 years of their working career, if they even work that long. Statistics from the major leagues suggest an even tighter timeline with average careers ranging from three to six years across the NFL, NBA, NHL and the MLB. Entertainers and industry professionals, on the other hand, typically have longer earnings cycles but chunkier cash flows.
DA: Today’s athletes and entertainers are also earning more than they used to. According to Forbes, in 2018, the top 50 Entertainers earned $3.6 billion in 2018, up 16% from 2017. The top 200 highest-paid NBA players, for example will make on average $13.4 million this year, compared to $8.3 million in 2014, according to Spotrac, a database for sports salaries, and NFL salary caps have increased by 40% over the same period. At the same time, the rapid rise in earnings – coupled with the longest bull market in history – and the accelerated earnings timeline for players mean that it’s critical for this population to develop a financial plan early on. SES’s goal is to help address the unique financial needs of this cohort by protecting and growing their wealth through investing, tax and estate planning and philanthropy, among other ways.