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Wisdom in a Multitude of Counselors

A Financial Model for the Professional Player
by: Thom Park, Ph.D.,
Associate Professor, Florida State University
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The NFL Draft covered so colorfully this April by an array of ESPN expert commentators has once again captivated the American football psyche with an over-analysis of this "game within the game." The annual reloading of America's major college and professional football teams through the recruiting and drafting process challenges to exceed the game itself in importance.

Any wise coach knows having the right names on the backs of the jerseys can overcome any number of coaching shortfalls. The personnel evaluation and acquisition process culminating for the new pros in the NFL Draft designates in seven rounds those 210 fortunate players who have an immediate shot at a financial independence scant few of their college classmates may ever enjoy.

As a coach, you may have observed one of your "once-in-a-career" prodigy players go through this unique ritual. The great playing career lures the clandestine agents, creates newfound friends, and then brings in the veteran NFL scouts. There is film study, player interviews, the Combine, pro timing day, the orchestrated tryouts for the great ones, and the spring team visits.

After the jubilation of the draft selection dies down, the lucky rookie draft protégé is confronted with the rather sobering thought and hard reality that he must very quickly learn to manage a multi-million dollar enterprise which is him. This is dangerous new ground.

In the current scheme of 30 teams, the "real money" is in the first two rounds. Even in days past with two dozen or so rounds and larger player pools, the "slotting" effect quickly separated the millionaires from the journeyman who will really work for a living. The average NFL team today is a bipolar distribution of wealth and income skewed heavily toward the blue collar have-nots.

Whatever each deal begets these drafted athletes, they have all been courted for months by the agents who signed them. Most believe once they sign the player-agent agreement, their agent takes care of everything. Generally, in the player's mind is the incredible falsehood his agent should handle his entire newfound, yet highly complex, business empire. Based upon this utter myth, many a financial disaster scenario has been built.

The emerging national awareness of abuses of agents in intercollegiate athletics has led to numerous proposed solutions, most of which are aimed more at protecting the NCAA institutions than the athletes. Managing the many permutations of agency where amateurism and professionalism merge is enormously complex, yet getting the athlete to be informed and educated by the right professionals with whom he must deal holds more hope than all of the legalistic, regulatory, managerial, and enforcement approaches combined.

The model, Wisdom in a Multitude of Counselors, was conceptualized for the sports agency course I help teach at Florida State University. This paradigm best illustrates the necessity of educating the athlete. Quite simply, the new pro is encouraged to deal with a multitude of wise and honest advisors from whom he can learn.

The system creates not only learning but checks and balances of control, thereby diffusing the players risk across more than one opinion, or personal agenda. Such an approach seeks to avoid the catastrophe scenario where one agent, sometimes with a power of attorney, is vested with total control over the athlete's affairs. This, combined with sole practitioner status in a small shop, can lead to the athlete being bankrupted or seriously duped. The model which follows seeks to avoid a singularly controlled situation.

Coaches have historically played only observational roles in this matriculation into the NFL. Parents, agents, friends, scouts and lately, the athletic administrators and regulators, have sought the majority of the influence over the player. The "Wisdom in a Multitude of Counselors" model describes an approach for the coach to advance as a trusted advisor. The coach should be willing and able to advise the athlete.

His newly minted millionaire player must learn to build a sound, diversified management team to assist him, just as any wealthy person does. No one person can do it all and the solo control agent myth must be busted early by the coach.

There are large sport management agencies which function as "one-stop shops" as well as solo practitioner sports agents who delegate most functions away, or with supervision, allow the free market to absorb them. There are conditions of cooperating specialized professionals, financially independent of one another but client sharing in a synergistic arrangement, and there are midsize full-service firms.

Each approach has its pros and cons, yet one thing is very clear: the majority of disaster scenarios begin with false belief in the player's mind that one person, his agent, can and should do everything. This problem is compounded when that agent is a solo practitioner with no institutional backing, no due diligence oversight and no solvent balance sheet. A power of attorney to such an agent can lead to financial disaster.

Sadly, this is frequently set in motion well prior to the draft when the athlete is recruited with the promise of a late-model car. The vehicle is often given before the final season ends. With POA in hand, the agent convinces the player to agree to sign with him by laundering a car to him bought with the loan money from a bank using the future earnings power of the player as collateral.

The player gets the car, the agent gets the player, the banker gets the loan, the dealer sells the car, the school get NCAA probation if it all comes to light, and the player gets stuck with the auto bill if he fails to make the NFL because the car was purchased on his debt. Schools have a difficult time with automobile registration programs, but with enough honest people in the players advisory circle, such unethical practices can be reduced.

A player who selects an agent because he will get him a car early is picking the wrong agent for the wrong reason and the uninformed media needs to stop celebrating such ridiculously exploitative activities.

Encouraging your pro players to educate themselves is the best hope for dealing with agency. The multiple advisor model advanced here has the best chance of diffusing the over-concentration of control from any one person's hands. By encouraging your athletes to lean on a wide array of experts picked because of their integrity and specialized expertise, the bad agent is slowed. This allows the novice player-millionaire to avoid fraud, illegality, and senseless loss.

Only by learning from the right people can our athletes hope to overcome the very steep learning curve of becoming an instant millionaire athlete.

Park's Paradigm for Sports AgencySports Contract Agent • generally a sports lawyer • negotiates a contract • sports career counselor • markets your talent • general advisor • may oversee other functions (4% or less of gross contract revenue paid as athlete is paid/also by project or hourly rate)(agent may handle endorsements or outsource these and other functions to qualified adjunct professionals. as required)Endorsements Agent • marketing &merchandising of talent • endorsement deals • outside income, non W-2 • product development (for top-tier athletes; 10-20% of gross revenues)Lawyer • general legal advice• estate planning &other legal documents • refers to other specialists (bills hourly- $150 and up)CPA • tax advice, federal and state • tax accountant/bookkeeping • prepares tax returns (hourly rate or by project, flat fee) • can also act as CFPFinancial Planner (CFP) • develop financial plan • development retirement plan• establish budget • develop retirement plans • advise on any financial decisions • business entity planning • works closely with investment advisor (hourly rate or flat fee)Investment Consultant, Broker &Asset Custodian (No POA)• large firm holds financial assets • investment advice • financial consultant • designs investment portfolio (securities) • cash management • may be a sports career counselor and may oversee other functions • may be general advisor (paid by commissions based on assets and/or account value)Realtor • home &real estate acquisition • appraisal estimates • negotiates buying &selling (full commisssions; 6-10%; discounters at 2%)Insurance Agent • catastrophic injury insurance • liability insurance • life, health insurance • disability insurance (commissions; check insurance market rates)Banker • loans for home &auto • loans for business interests • lines of credit (check market rates; points on loan)Endorsements Agent • marketing &merchandising of talent • endorsement deals • outside income, non W-2 • product development (for top-tier athletes; 10-20% of gross revenues)

Thom Park, Ph.D., is Courtesy Associate Professor at Florida State University and Vice President, Investments, at Dean Witter Reynolds Inc. A nationally-recognized expert on sports agency issues, he serves as financial consultant to numerous sports celebrities.


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