According to a Sports Illustrated article dated March 23, 2009 entitled “How (and why) Athletes Go Broke,” within five years of retirement, sixty percent of former NBA players have gone bankrupt or are under financial stress.[1] Some well known NBA players have suffered such consequences including Alan Iverson, Jamil Lewis, Latrell Sprewell, Derrick Coleman, Kenny Anderson, Antoine Walker and Eddie Curry to name a few.
There are several reasons attributed to millionaire NBA players suffering financial stress including: spending like a drunken sailor as if the checks will never stop, creating unsustainable lifestyles, buying houses the size of the State of Texas, having an expensive appetite for diamonds and automobiles, risky and sometimes even inane investments, a chronic misallocation of investment dollars to non-liquid assets and private equity deals, misplaced trust in agent management, granting powers of attorney, divorce and paternity actions, and supporting a long list of enablers. Young athletes can spend too much money, and everyone takes home much less than they realize.
Fortress Investment Group co-founder Wes Edens bought the Milwaukee Bucks, along with Avenue Capital Group co-founder Mark Lasry and York Capital Management founder James Dinan in May of 2014. Edens states that he is paying the members of the Milwaukee Bucks enough money to secure their future and he wants to help insure that the money does just that. Edens has begun working with Bucks players to help them avoid a fate suffered by many NBA veterans after retirement. “I want to help guys out to understand financially how to be in a better place,” Edens said. “I know when I was 22 (years old), I made a lot of bad decisions.”[2]
Three members of the Milwaukee Bucks’ roster are just nineteen years old. Edens brought a group of Milwaukee Bucks players to his Martha’s Vineyard home to hear private presentations on financial management. Financial advising and financial management by good people is a necessity. [3]
Philadelphia 76ers Michael Carter-Williams, now traded to the Milwaukee Bucks, may have gotten it right. The 22-year old basketball player, who has garnered a guaranteed $4.5 million over his first season, has decided to rely solely on his earnings from Nike and Panini trading cards. Carter-Williams, with the help of his mother, decided recently to lock most of the $4.5 million away in a trust fund for the next few years so that he can’t touch a penny of the money he earned. His mother, Mandy Carter-Zegarowski, manages her son’s financial future. She said, “[r]ight now the focus is not only to save as much as possible, but also to use his unique position to serve as a role model and give back to the communities that continue to support him and his career.”[4]
The idea is simple – protect the young athlete from living a costly and unwise lifestyle.[5]
“While the leagues and unions do offer financial boot camps and mandatory financial seminars, this process must begin earlier than the beginning of a pro career. Our universities, realizing that our future pro athletes are ill-prepared to handle the financial aspects of their lives, should begin that preparation with courses (sponsored by the professional leagues) at the college level so that we have more Woodson-types out there.
Finally, if the statistics are actually as bad as indicated, the league or union may have to step in. Creating new rules to impose a constructive trust on income earned by professional athletes to protect themselves and their families from themselves may be the best step.”
See, also, Woodson, a financial all-star, The Journal Sentinel, September 21, 2012. http://www.jsonline.com/news/opinion/woodson-a-financial-allstar-9a6taka-170774176.html?ipad=y
[1] How (and Why) Athletes Go Broke, Sports Illustrated, March 23, 2009. http://www.si.com/vault/2009/03/23/105789480/how-and-why-athletes-go-broke
[2] Milwaukee Bucks Owner Wes Edens Wants to Reduce number of NBA Players filing bankruptcy by Mark Crass, Milwaukee Business Journal, November 13, 2014. http://www.bizjournals.com/milwaukee/blog/2014/11/milwaukee-bucks-owner-wes-edens-wants-to-help.html?ana=twt
[3] Id.
[4] NBA Rookie Takes Mom’s Advice and Put His $4.5M Salary in Trust for 3 Year by Christine Campbell, January 19, 2015. http://earhustle411.com/nba-rookie-takes-moms-advice-and-put-his-4-5m-salary-in-trust-for-3-years/
[5] Id.