How Basketball Players Spend Their Money
NBA players are vastly different from other wealthy people. They’re taller than most surgeons, they’ve got a better jump shot than most security traders, and their move off the dribble can usually beat even the best divorce lawyer. And, unlike other high earners, professional basketball players, who pull down an average of $2.3 million, make big money for only a very short time. (The average length of an NBA career is 3.7 years.) So, if they’re smart, they’ll spend their money differently, too.
The problem is, wisdom on the basketball court sometimes doesn’t translate into financial savvy. Thus the essential choice of an agent or financial representative often tends to be among the player’s least informed decisions.
It’s difficult, an NBA agent, who currently represents over twenty players, says. Think about it: an 18, 19, 20-year old kid is subjected to a kind of an intense recruitment with everyone putting their best foot forward. Who can he turn to for advice? His parents, more often than not, don’t know more about business than he does. And his coach, or school, will often steer him toward an agent THEY’RE involved with, which is usually not in the kid’s best interest.
At least there are no shortage of suitors to choose from. About 400 agents are certified by the NBA Players’ Association, all of them eager for a piece of the action. Some only negotiate player contracts, others offer a dazzling variety of financial and investment services. Some are lawyers, others have a business negotiating background. Knowing where to turn can be a bewildering prospect, though reputable agents advise comparing notes with other players.
Once a player does sign with a representative, they’re likely to make most of the financial decisions together. Still, the player has probably figured out his first priority: mom.
It’s really touching, agent Bill Blakeley, who used to represent Utah Jazz star Karl Malone, said. A lot of these kids are brought up in single parent homes, with a large number of siblings, where the mother had to make all kinds of sacrifices so they can play basketball. And, almost without exception, the first thing they’ll tell you is, “I must buy a great house for Mom.”
The player’s next purchases, routinely, are his own house and a nice car. Then the tough choices begin.
Initially, for players making the minimum of $348,000 (about $200,000 after taxes and the 4 per cent agent’s fee), investments may not be a major concern. But once salaries rise, good agents steer players toward safe, longer-term investments. Think of it: of a $1 million NBA salary, $40-100,000 has been spent on the rep’s services, $350-400,000 on taxes, and, generally, $200,000 on annual personal costs, such as clothes, cars, stereos, and a mortgage.
That still leaves some $300,000 that can be used for a player’s post-NBA life; a safe investment will turn into a cozy nest egg after 12 years. There’s no need for immediate gratification, agent Bill Pollak once told this writer. Generally, the more conservative you are, the better you serve the player.
These days players tend to take a more serious look at their future. Two current players plan to go to medical school. Another active NBA player, a business graduate in college, already owns a number of serious ventures.
The instant gratification influences, of course, can still be hard to resist at times; the agent’s toughest task of all may be to convince an 18-20 year-old kid—someone who has never had much money but who now earns millions—to take a steadied approach to investing. You have to be strong, you have to know who you are, said Pollak. I know I’m not the right guy for every player. If they want to spend flamboyantly, I am probably not their man.
But, most of the time, things turn out far finer. It’s a full-time job, agent Larry Gillman said. You talk on the phone almost daily with your guy, taking care of the most personal problems at times. And players appreciate it: Gillman’s onetime top client, the Detroit Pistons’ Cliff Robinson, built a house in Fairfield County, Connecticut. Right next door to his agent’s.#