During the 13 years of his professional basketball career, three-time NBA All-Star Antoine Walker earned more than $108 million dollars playing for teams including the Boston Celtics, Dallas Mavericks and the Miami Heat. But just two years after his 2008 retirement, Walker found himself filing for bankruptcy.
In the world of pro sports, such stories are sadly familiar. While there are megastars like Shaquille O’Neal — who reportedly earned more than $290 million on the courts and continues to rack up millions for advertisements and TV analysis, according to Bloomberg Business — about 60 percent of the players in the National Basketball Association go broke within five years of retiring from the game, according to an oft-referenced Sports Illustrated story from 2009.
Pro football players fail financially off-field even more often, according to the Sports Illustrated analysis.
The chief issue, says Walker: financial ignorance. “At 19, you don’t think about the future,” he said in a recent phone interview.
To help other athletes dodge the same fate, Walker and former NFL linebacker Bart Scott have teamed up with Morgan Stanley’s Global Sports & Entertainment Division to promote financial literacy among college and pro athletes. Sports leagues, educational institutions — including the University of Miami — and financial services firms have also launched programs designed to raise athletes’ fiscal savvy.
Where do athletes go wrong?
While a recent working paper from the National Bureau of Economic Research disputes some of the dire NFL statistics, sports fans don’t need to look far — think former Dolphins and University of Miami quarterback Bernie Kosar — to find proof for the underlying thesis: Earning millions on the court, field or diamond isn’t a guarantee of long-term financial success.
For Kosar, a trifecta of bad — bad advice, bad economy, bad divorce — and a penchant for generosity led to his 2009 bankruptcy. For former Heat player Eddy Curry, who earned more than $55 million, the issues were family, bad investments and overspending, according to published reports. University of Miami football star-turned-Tampa Bay Buc Warren Sapp reportedly lost $30 million in a sour real estate deal, alimony and child support.
The list goes on.
In Walker’s case, family pressures, gambling debts and an affection for finer things were contributing factors, according to press reports. But the real toll came when the Great Recession tanked his real estate investments, which were backed by his personal holdings, he told CNN Money.
“There is no single answer,” said Ed Butowsky, who works as a financial advisor for many professional athletes. “Sometimes it’s simply overspending; other times it’s more complex than that. It’s a tough situation to be thrown into with no finance experience.”
Butowski, managing director of Dallas-based Chapwood Investments, has worked with professional athletes for 22 years. In his experience, private investments are often part of a losing game plan.
“One of the number-one reasons that athletes go broke is because they put too much money in private, illiquid investments,” Butowski said. “They put upwards of 80 to 90 percent in these investments, and then when they lose big, they’ll double-down by investing in something even riskier trying to get the money back.”
At the same time, players are often vulnerable to shady investment advisors. Just this year, Denver Broncos quarterback Mark Sanchez and San Francisco Giants pitcher Jake Peavy lost millions of dollars to an investment advisor who funneled their money into a struggling online-ticket business, according to filings unsealed last summer in federal court in Dallas.
The advisor, Ash Narayan, primarily recruited professional athletes. He was registered in the NFL Players Association Financial Adviser Registration Program, which was established to provide NFL players access to provide an “additional layer of protection” from poor financial advice and fraud, according to the association’s website. The NFLPA has since removed Narayan from the registry.
While the high-profile scams grab the most headlines, players also are vulnerable to F+F: friends and family. In his book, “New Money: Staying Rich,” former University of Miami football player and NFL player Phillip Buchanon chronicles his own struggle. After Buchanon was drafted by the Oakland Raiders in 2002, his mother demanded $1 million in return for raising him.
“Once the money started coming in, I automatically became a bank to everyone, and everyone started to take what they felt was their share,” Buchanon said. “I didn’t realize I was being played for too long. I was way too naive.”
Exacerbating the problem are today’s massive salaries.
When the late Earl Morrall quarterbacked the Dolphins’ perfect season team in 1972, he earned a then-whopping $90,000 per year. By contrast, Ryan Tannehill will rack up more than $19 million this year — almost 40 times Morrall’s salary when adjusted for inflation.
Dick Anderson, who played on that same team, earned $38,000 for the season. Because starting salaries weren’t much higher in football than in other careers, most players earned a degree before going pro. Training schedules were somewhat lighter, and players had a full six months per year to earn a degree — some went to law school, others to med school — or to develop a business that would become their career once their game days ended.
In Anderson’s case, that was insurance. He also spoke frequently as a Dolphin — creating the connections that would help him become a Florida senator.
“In our day, we knew there was a transition into the real world. Today, there’s no incentive to do anything while [players] are playing the game.” The statistics around post-athletic career failures are, he said, “a travesty.”
The core problem, all agree, is a lack of financial literacy. Take Curry, the former Miami Heat player. In 2005, Curry signed a $60 million, six-year contract with the New York Knicks. Five years later, he defaulted on a $575,000 loan with an 85 percent interest rate.
“If they had the right teaching from the very beginning on what not to do, they’ll definitely be better off,” Butowski said. “It’s something that the leagues have been trying to do more of recently, with varied success.
Since 1991, the NFL has worked to develop educational resources for players through its Player Engagement division. After years of limited success, the league switched its strategy. Instead of hosting its rookie development on a national level, the league delegated the responsibility to each individual team.
Teams are now responsible for providing local resources for a transition into the NFL for both drafted players and undrafted rookies. Every team has a director of player engagement who works one-on-one with players transitioning out of their pro careers.
At the Dolphins, that job belongs to Kaleb Thornhill. Throughout the year, he and his counterparts across the league hold more than 50 “Personal Development Workshops” for both rookies and veterans, alongside a host of other resources. The goal: financial literacy among players.
“In Miami especially, the flashy, expensive, extravagant lifestyle is really seductive to these guys,” Thornhill said. “When you give a 20-year-old guy millions of dollars, it’s hard to keep him from spending too much. We try to rein that in.”
Beyond financial literacy sessions, players who want to return to college to finish their degrees or to pursue a graduate degree can receive tuition reimbursements of up to $20,000 per year. The resource is part of the division’s effort to motivate players to invest in themselves so that they can have skills post-NFL.
“They’ve been playing for years, and so many of them might not know what they want to do after football,” Thornhill said. “But getting that degree is always a valuable thing to do.”
As part of the deal that ended the 2011 lockout, the league created a $24.2 million scholarship trust. Active players who have played two seasons or more are automatically entitled to a tuition reimbursement of up to $20,000 per year with a lifetime maximum of $60,000 for undergraduate and postgraduate programs. Retired players are grandfathered into the same deal, provided they played more than five seasons.
The NBA and National Basketball Players Association take a similar approach through the NBA’s Career Development Department, which arranges seminars featuring retired athletes who have transitioned to other careers. The players offer advice from their own experience in conjunction with a curriculum in a specific subject in financial literacy.
This past June, the organization held its second real estate symposium in Manhattan, led by David Eyzenberg, founder of real estate investment banking firm Eyzenberg & Company and adjunct professor at NYU and Columbia.
“A lot of these guys just don’t have the education that they need,” he said. “A good portion of that education comes from firsthand experience in the industry.”
For its Rookie Transition Program, the NBA pairs former players with newbies in a four-day orientation on how to survive their careers and continue to survive into retirement.
For Major League Baseball, the statistics are less dramatic but still unsettling, with a bankruptcy rate four times the average American, according to a 2013 analysis by financial website Mint.com. Among those financially hit were several high-profile players scammed by convicted Texas financier Allen Stanford, who did much of his recruiting from a Miami office.
Perhaps because the rate of financial disaster is significantly lower than in the NBA and NFL, the MLB does not have the same resources for career transition or financial literacy.
But it does, and has, recognized the difficulties of transition to pro-sports. Since 1991, it has held an annual “Career Development Program.” Teams send three major-league prospects to the event to prepare them for life in the major leagues, though the focus is more on avoiding performance-enhancing drugs and criminal convictions than financial sound worthiness.
Last year, the University of Miami launched an 18-month executive MBA program for NFL players. “We saw a gap,” said Anuj Mehrotra, dean of UM’s School of Business Administration. Modeled after the school’s executive global MBA, the 18-month program has been tweaked to fit around the football season and practice schedules and focus on areas of student interest.
The program is eligible for the NFL scholarship reimbursement program.
Most of the 40 students in the first class are entrepreneurs or already engaged in real estate, finance and entertainment, said Mehrotra. “They tend to be surrounded by people giving them so much different advice. But in the end, they are a brand in themselves. It’s like coaching a team but the coach doesn’t have knowledge of the game. They’re trying to get that understanding themselves. They want to control their own destiny.”
More than 30 graduated last summer. Among them were current Miami Dolphins players Michael Thomas and John Denney.
“I had always thought about going back to school to get an MBA,” said Thomas. “I didn’t take too many business school classes as an undergrad, so this was a great opportunity for me to become more business-savvy while I’m still in the league.”
The 18-month program is designed with the regular football season in mind: Participants attend six two-week residencies in Miami during the NFL’s off-season, with distance learning during the regular season.
The inaugural class included more than 20 current NFL players from 12 teams, including nearly a dozen first-round draft picks. And while the program is designed for athletes, it is still taught by the same faculty as any other MBA. The program features classroom instruction, visits with business pioneers, case studies and team-building projects.
Denney, the longest tenured player on the Dolphins’ roster this season, credits Thornhill, the player engagement director, for steering him to UM.
“He pointed me in the right direction,” he said. “I had always had it in the back of my mind as something I wanted to do, but that extra push out the door was helpful for me.”
For Miami’s Anderson, who has long been engaged in the conversation about post-game strategies, the problem doesn’t lie with the league itself. As proof, he points to customized programs created by the NFL and the NFL Players Association at Harvard, Stanford, Wharton and Kellogg.
“You can lead a horse to water,” Anderson said. But instilling the idea that a player needs to be financially educated isn’t as easy.
That’s where Walker, Scott and Morgan Stanley come in.
In 2014, Morgan Stanley’s Global Sports & Entertainment Division launched a program to promote financial literacy among college and pro athletes. Since then, the initiative has held about 80 sessions with more than 5,000 student athletes and a host of pro organizations.
“We wanted to change the narrative. We wanted to see the statistics go down in a positive way,” said Managing Director Drew Hawkins. But the team quickly realized that conventional seminars were a game stopper.
Instead, Scott or Walker tells his own story, so players can relate. No financial advisors are allowed in the room. Neither are marketing brochures — though everyone gets a workbook with sample budgets and information about tools like credit scores that are unfamiliar to many in the rooms.
The fast-paced format includes interactive scenarios around life choices like those Walker faced.
“People read about me on the internet. I try to be open and honest about where I made my mistakes,” Walker said. “I was very generous with family. I tell them, you want to be generous, but you have to have a cutoff. You have to get the word ‘no’ in your vocabulary.”
The questions are sometimes very specific, such as those related to Walker’s failed real estate deals.
“For me, personally, a guy who made over $100 million, I didn’t know how to handle money at a young age, with taxes, investing. It hurts when you work so hard and then you lose it all. I want to make sure guys understand that they need to have money for the rest of their lives. I just want to make a difference.”
Jack Herrick and Miami Herald Business Editor Jane Wooldridge contributed to this report.
Highest paid athletes
According to Forbes, the world’s 100 top-earning athletes earned a collective $3.15 billion in 2015; 29 percent of that came from endorsements and appearances. The 10 highest paid athletes for 2016 are:
1. Cristiano Ronaldo, Portuguese soccer player, $56 million salary, $32 million endorsements
2. Lionel Messi, Argentine soccer player, $53.4 million salary, $28 million endorsements
3. LeBron James, U.S. basketball player, $23.2 million salary, $54 million endorsements
4. Roger Federer, Swiss tennis player, $7.8 million salary, $60 million endorsements
5. Kevin Durant, U.S. basketball player, $20.2 million salary, $36 million endorsements
6. Novak Djokovic, Serbian tennis player, $21.8 million salary, $34 million endorsements
7. Cam Newton, U.S. football player, $41.1 million salary, $12 million endorsements
8. Phil Mickelson, U.S. golfer, $2.9 million salary, $50 million endorsements
9. Jordan Spieth, U.S. golfer, $20.8 million salary, $32 million endorsements
10. Kobe Bryant, U.S. basketball player, $25 million salary, $25 million endorsements
The highest paid women in sports:
1. Serena Williams, U.S. tennis player. $8.9 million prize money. Off-court income estimated at $20 million.
2. Maria Sharapova, Russian tennis player. $1.9 million prize money. Off-court income: $20 million.
3. Ronda Rousey, U.S. Ultimate Fighting Championship fighter. $10 million purses/bonuses; $4 million income outside of UFC.
4. Danica Patrick, U.S. race car driver. Salary/winnings, $7.9 million; outside income, $6 million
5. Agnieszka Radwanska, Polish tennis player. Prize money, $5.2 million; off-court income, $5 million.
Women athletes face different challenges
For women athletes, the issues are less about losing their winnings than figuring out how to make a living.
Statistics about the number of women pro athletes in financial distress aren’t readily available. That’s likely because women have far fewer pro athletic options. And in most cases, the salaries are chump change when compared with those in men’s sports.
Proof: In 2014, average salaries were $2.1 million in the NFL, $3.82 million for MLB, $4.9 million in the NBA and $2.58 in the NHL, according to Forbes. By contrast, the maximum salary for a player in the Women’s National Basketball Association the same year was $107,500.
The same inequities exist in most other pro sports. Earlier this year, for example, five top women soccer players filed a federal complaint with the Equal Employment Opportunity Commission against U.S. Soccer, alleging wage discrimination. Women are paid $99,000 per year provided the team wins 20 exhibition matches, while male players earn $263,320 for the same success.
The exception is tennis, where prize money is equal for men and women at the four Grand Slam events, reports Newsweek.
As a result, women know early on they will need to look beyond sports for their careers, said Beth Brooke-Marciniak, global vice chair, public policy at EY, formerly known as Ernst & Young.
“I think men at the start probably look at their lives as a professional athlete and say they can make enough money to sustain them throughout their lives. Women know they aren’t going to make enough [to do that].”
The firm signed up three years ago to sponsor the Rio Olympics as part of its commitment to inclusion, especially to women in leadership. “I just started talking to female Olympians. We started hearing story after story about how they would get to the end of their career in sports and wouldn’t know what their options were.
“These are some of the most incredible leaders in the world, but they just weren’t thinking big enough. No one was helping them pivot.”
Brooke-Marciniak was familiar with the syndrome. A basketball player who attended Purdue on a scholarship when women had no pro sports options, she was guided by a college counselor.
To offer that same kind of support, EY created the Women Athletes Business Network, which has hired eight Olympians in six-month internships. The company has also partnered with the International Women’s Forum to create a mentoring program for elite female athletes that pairs 25 athletes worldwide with women leaders in a yearlong program.
Said Brooke-Marciniak, “They need experiences. They need to discover their passions and strengths outside sports.”