Financial advice for hockey players

Hockey was on everyone’s mind yesterday as the Toronto Maple Leafs headed into their seventh showdown against the Boston Bruins.

As one fan noted prior to last night’s game, the Leafs were still alive and had garnered the attention of fans across the city and country.

In honour of the dynamic playoff series (and despite its heartbreaking end), we pose this question: What do NHL all-stars Jarome Iginla, Nik Antropov and Eric Staal have in common, besides their barrel-thick necks and numbers on a jersey? They need advice. And grooming players for a life post-hockey is wealth advisor Stew Gavin’s latest trick.

Gavin’s no stranger to the ice. He played 13 seasons with the Toronto Maple Leafs, Minnesota North Stars and the Hartford Whalers, only to be forced out at 33 with a knee injury. But a management stint with the Dallas Stars, and getting his mutual funds and life licences back in Toronto in 1995, provided him a whole new set of gear. He drop-passed it to Bay Street where he padded clients with enough financial flair to score past the goal line.

Players who are plucked for pro at 18 and hit with hefty signing bonuses (if they joined pre-lockout) may feel retirement is about as far off as a Stanley Cup win for the Leafs used to be. But Gavin and Alberta advisor Kim Harder aim to change that, getting their clients young and teaching them there’s more to life than a stick and a puck. And that retirement rarely comes by choice.

Read: How investors and athletes are alike

While some see 40 as the new 30 for today’s players, Gavin’s busted knee is testament to that looming uncertainty. “It’s always that they’re hurt and they leave the game, or the team says, ‘we’ve had enough of you; you’re not good enough. See you later,’ ” he notes.

Though that’s yet to be the case for Iginla, Staal or Antropov, with Gavin playing wealth coach, these men are chasing the puck alongside the reality that “unless they’re going to play for 15, 20 years, they probably won’t be able to accumulate enough money and capital to generate an income that they won’t have to work after.”

So then what? Become a colour commentator on CBC or TSN? It isn’t as easy as it looks. “When Kelly Hrudey gets the job, that’s the job. There aren’t 800 more out there with the number of guys in the NHL preparing for retirement,” says Harder.

But surely players like Iginla are safe, right? He’s one of the league’s more media-savvy players among what many deem a pack of stereotype hosers. And it’s public record the Penquins player scored a $21 million contract during his 17-year stint with the Calgary Flames.

Regardless of these high earnings, Freedom 30 or 35 is a reality in the sport. And for players who think they can play forever, Harder, a certified financial planner with Over-Time Inc., in Sherwood Park, Alta., has a smart tactic: Treat them like boomers. “In the financial planning cycle you’re probably about 52, 53, because you are coming close to retiring,” she tells clients.

Read: For portfolios in need of pinch-hitting

Mete out risks carefully, she explains, as even a 10% hit on a million dollar investment can wipe out someone with lost income potential. “It’s such huge money over a short span, versus average money over a long span.”

Stall the Windfall

Iginla met Gavin through former player Dave Gagner. Lucky for “Iggy,” who, just a few years later has inked whopping contracts including an earlier signing bonus of $500,000, a past cause of lockout fury and one that resulted in fewer zeros behind the bonus, but a reality that still exists for many players and requires sharp shooting from a money coach.

Harder knows how fast it can go. “I’ve seen a first rounder with a net worth after three years of salary and a million dollars in signing bonuses and he still has a huge mortgage of $100,000, and nothing else to show for it. He squandered it on vehicles and spent money on Mom and Dad, friends, clothes, and the girlfriend that just needed to have that $25,000 ring.”

Though reining players in is Gavin’s and Harder’s goal, some things are unpreventable. Ask any all-star and they’ll have a similar recall—Staal got his Cadillac Escalade, Antropov his Lexus, while Iginla held out . . . for a while. “My dream was always to have a Porsche 911. I didn’t buy it right away. I bought it on my first contract . . . in my second year,” he says.

So the car’s a given, but it stops there. Both advisors drive home their cash-flow management messages with force. “Stew has a plan where they set it out and show you how [your spending] will impact your future net worth. I enjoyed [the Porsche] more being able to know personally that I was on track to reach the targets we had set. When you have a plan it helps you enjoy your purchases more,” attests Iginla.

For Gavin, cash-flow grounding is critical for young NHLers, a specialized niche that comprises more than 60% of his client base. With average family incomes exceeding the league minimum, the asset base is skewed to match the salary discrepancies. Not all players bring home the Iginla bucks, though.

Read: Should you be a specialist?

Gavin explains, “It’s typical to see four or five players on a team that are highly compensated, say, in excess of $5 million a year, while the remaining 15 players make less than $1 million a year.” Often, a handful of players will take up half of the salary allowance for a team.

Gavin aims to help both top-dog and bottom-rung athletes reap financial independence, so that when they leave the game the income from their portfolios would exceed their lifestyle costs. “If that means they need $10,000 a month once they finish playing hockey, then that is always there for them for life, indexed to inflation, and we’ll set up and tell them basically what they have to do to attain that,” he says.

But defining cash-flow needs can be tricky, he adds, when most athletes expend close to $15,000 a month on lifestyle alone. There’s disability insurance running at $10,000 to $20,000 a year; player association dues; Medicare in the U.S.; Social Security; trainers’ tips and agent fees which are 3%-to-5% of their salaries. Much outflow is related to fixed-employment costs, essentially a rite of being in the club.

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Take for example initiation for newbies who traditionally have had to pick up the check for a team dinner. Seems luck runs on Iggy’s side. During his first season he shared the tab with 12 rookies. “Definitely cost effective,” jokes Iginla. “We were in Nashville at a steakhouse called The Stock-yard. We bought dinner for the team—about 30 people that had a very healthy meal.”

Continue on to find out more about how advisors plan for hockey players.

Gavin’s clients also need help in areas such as pension planning, managing multiple residences, and tax planning for cross-border issues. For wealthy players, there are private investment opportunities to explore—specialty funds that may become more aggressive with time, that require sufficient tax techniques and education from advisor to client.

Iginla recalls developing his sea legs with Gavin and partner Matt Bacchiochi, a CFA. “What I like is they look at your overall portfolio and give you tips but they aren’t pushy,” he says. “I was completely green; I didn’t know too much about [investments]. I was always so worried about losing my money, but they just kind of nudged me along . . . at my pace and comfort level . . . and [I] got a better overall understanding.”

Gavin makes conservative assumptions from the onset, telling clients there are no guarantees when it comes to contracts. Perhaps better to hold off on that big-ticket item until there is greater establishment in the league. For a 20-year-old who just wants to play in the NHL, hang out with his buddies over beer, and drive around in his Range Rover, it’s not so tough.

Usually, at that stage, the player doesn’t know what he wants, so Gavin suggests parking the cash, saving as much as possible, and accruing an asset base before anything else. “It’s really managing those expectations, setting goals and, while they don’t realize it, making sure that they’re saving enough money,” he says.

Read: CFL players becoming advisors

Hitting the highlife can still happen but maybe wait till that second contract, say at 23, when a couple million is saved, along with a new $4-million offer on the table. Staal practiced Gavin’s preach, even when presented with his first contract, which included more than $1.2 million in signing bonuses and extras. He said, “Basically all I bought was the car. I rented a townhouse in Raleigh, NC. I rented my furniture.”

Years later, he was mature enough to have purchased a cottage, complete with a boat, wakeboard, and a pair of quad runners.

Harder creates budgets 12 months out to determine if a client actually needs protection from himself. Monitor a player’s spending habits in the first month, she explains, and if the Visa’s showing $10,000 out of the gate, hold another meeting right away and put the brakes on. Says Harder: “I’ll suggest to them, ‘You need time to think. You’re impulsive. You’re excited. Let’s do something with your money where it’s tied up for 30 days—as simple as a GIC, term deposit, or a 30-day bond—something where you’re now going to be forced to think about spending your money.”

With capital preservation the goal, she says the best bet is to keep it simple. “These kids don’t have to get into complex types of investments. And the one rule of thumb I say to them is, ‘I don’t care what it is in life; if it’s your money, if it’s insurance, anything—if you don’t understand it, don’t sign it, and don’t do it.’ ”

But one of Harder’s favourite success stories involves 28-year-old Ryan Stone, a player who hails from Alberta. Through basic cash-flow detox, Harder was able to help him live within his minor league salary, make his rent and truck payments, get him debt-free, recoup his squandered signing bonus, and get him ready to buy his first home.

“I came out of [a meeting years ago] thinking, ‘He got it. He’s there.’ That’s why I like the young kids; you can train them before they get into bad habits . . . so if their careers go south they still have a tangible asset.”

Read: Should your client buy a sports franchise?

Cross-border planning is also critical for advisors who deal with big league athletes. Gavin works with a consortium of professionals such as lawyers that can help with such things as wills and powers of attorney for a player who may be a Canadian citizen residing in Phoenix.

And make sure you cut the Canadian cord, says Harder—everything from healthcare ties, to registering vehicles in the U.S., getting a state driver’s licence, setting up accounts and ensuring there are U.S.-licensed money managers. Harder helped Stone set up his U.S. banking, start to build his U.S. credit, reviewed his property and casualty insurance, ensured he had proper car insurance, renter’s insurance, liability insurance, all the while trying to delete as many ties to Canada—such as his life insurance, to offset some of his debt.

She helped set up his wills as well, enduring powers of attorney and personal directives, while conversely trying to make sure he kept some ties to the U.S. That was so “when he does come back in the summer he’s not under the microscope of CCRA and potentially drawn back into that, because that would be a tax nightmare.”

Czech In

Both Gavin and Harder’s practices contain a niche within a niche. They’ve each devised strategies to help Eastern European NHL players acclimatize to the Canadian fiscal setting. Gavin recalls when Antropov arrived on Canadian from his native Kazakhstan. All his money communications went through a translator—leaving ample room for misconstrued instructions.

“They come here, they don’t have a parent they can ask, they don’t have a bank account, they have nothing set up and really no one to talk to about the lay of the land in North America, and what they should be doing and how it works,” says Gavin. “They may have a half a million dollars sitting in their bank accounts but they don’t know what to do, so they don’t make any decisions. Maybe it’s that they don’t know who to trust. They just park their money in their bank accounts until they feel comfortable,” he notes.

Gavin will literally lead players to the bank himself to open that initial account, and then it’s about setting goals and objectives. And in some cases, he says he’ll take a power of attorney on the accounts to limit what they can spend. “They know that’s their priority, not to buy hundred-thousand-dollar cars,” he explains.

Harder remembers a day when eight Czech Republic clients sat in her living room eating barbecue under the guise of a group counseling session on disability insurance.

“They truly didn’t know what it was or the types available; they didn’t know why they’d do it; they didn’t know the process; they didn’t know the forms,” she recalls, noting it was an all-out perfect education day. “It’s easier sometimes in a group, especially if there’s a language barrier,” she explains. In this case, those who didn’t speak English, didn’t quite grasp the insurance concept. Those who understood and who could translate were able to explain it to their colleagues.

Home and Visitor

The NHL off season is a prime time to meet with clients. “I talk to them at least every two weeks, but we have huge annual meetings in the summer,” says Harder. Gavin meets clients at least a couple times a year, handy when visiting-team players are coming through. “When they play the Leafs, the guys can come upstairs or we can go downstairs and see them, but the reality is we travel,” he says.

He and Matt will also go to them, as many A-list players have second residences in places such as Lake of the Woods, near Manitoba, Muskoka, Florida, or Arizona. “It’s a tough job, you have to go to these nice multi-million dollar cabins in beautiful places and conduct some business,” jokes Gavin.

Iginla’s annual review with Gavin happens just before training camp, when pay periods start up again. “We’re constantly showing them a 10-year projection and updating it and looking at the goals and resetting them again. This is how your net worth appreciated; this is where the appreciation came from, the capital, the improvements in the investment returns,” Gavin explains.

“You’re ultimately highlighting ‘Are you there yet?’, or when will that happen?, and dovetailing that into new contracts and whatever else is going on in their lives.”

Other advice to youngsters with a puck? “Watch your money, know where it goes, be on top of it and get interested with it—even the longest career is still a short career.”

*This article was originally written in July 2007