The news last month that Morgan Stanley Wealth Management was forming a Global Sports & Entertainment (GS&E) division to provide specialized financial advice and services to professionals in the sports and entertainment industries should surprise no one.
Professional athletes, and their significant compensation, have long been an attractive target of the financial services industry. However, many firms have retreated from this task after they realized how difficult it is to break into the inner circle of the athlete as well as how high maintenance the clients are.
Morgan, however, is undaunted.
“We are committed to cultivating money-smart young adults to help curtail issues that may arise from sudden wealth, unpredictable career spans and unintended consequences,” said Drew Hawkins, a managing director and head of GS&E. He added that this group’s unique characteristics—they “do not subscribe to conventional planning”—play to one of Morgan’s strengths. “With the resources of the Global Sports & Entertainment division, our directors are equipped to work with talent and their personal advisors—agents, business managers, family and other spheres of influence—to help make smart choices around how they invest, borrow, protect and give.”
The firm has adroitly established a foundation for this initiative.
“An inaugural group of financial advisors across the country has been chosen for their experience working with athletes, entertainers, directors, writers, producers, owners, agents and business managers,” according to a press release. “These financial advisors recently completed an education program, attaining the title of Sports & Entertainment Director. They provide sports and entertainment professionals with access to customized resources and programs, including asset and liability management, philanthropic and lifestyle advisory services, family governance and advanced financial planning, insurance, investment banking and private equity solutions.”
More on the initiative can be found here: www.morganstanley.com/wealth/gse
Upstart Embraces a Different Strategy
Morgan, however, will not be alone when it comes to knocking on the doors of agents and their clients.
Enter Pro Athlete Direct™, a company that “connects financial advisors with professional athlete clients.”
Pro Athlete Direct announced the results of a survey last week that neatly justified its entry, as well as that of Morgan Stanley, into the market.
In essence, “professional athletes, widely regarded as people who ‘have it all’ are often not well served by the people they trust to help them with their financial management matters,” according to the company.
“It’s almost shocking,” said Brian Ouellette, co-founder of Pro Athlete Direct. “Pro athletes may be our heroes, but they can be quite vulnerable when it comes to money and real estate. They’re young. They practice and travel around the clock. Perhaps it shouldn’t be surprising that they need good financial planning help.”
Pro Athlete Direct offers financial professionals the unique ability to meet athletes as well as the agents who represent them. The company is offering to provide access to attorneys and Realtors, “who want to build their businesses dramatically by tapping into the underserved pro athlete market.”
Ouellette told Sports Litigation Alert that “the key relationship” is the sports agent and that he believes that Pro Athlete Direct will be viewed more as a partner than a threat.
Sports agents risk a “conflict of interest” when they begin “dabbling in areas not their expertise,” said Ouellette. “To avoid conflict of interest, the agents who are open to identifying the best advisors vs. the best compensation for themselves not only have an opportunity to take better care of their clients. They also can pull market share from the agents who remain with these conflicts (friends as advisors, advising themselves and/or receiving compensation for directing their clients to certain investment vehicles).”
Ouellette went on to call Pro Athlete Direct “a consulting company, which coaches our members (financial advisors, real estate agents, attorneys, service providers) how to develop the relationships counter to how 95 percent of the other advisors are doing it by creating the foundation relationship with the sports agent, first, using our proprietary Education Based Marketing System (EBMS™). This is designed to establish our members as an authority and trusted advisor in the eyes of the agents in the beginning of the relationship. This is a distinction that differs from advisors who pitch and sell out of the gate.”
Sports Agent Expert Sees Hurdles
Regardless of the model, it won’t be easy.
“The financial services industry is not the only one that has recently gone through a process of seeking to associate with sports,” Darren Heitner, owner of Heitner Legal, P.L.L.C. and author of How to Play the Game, told Sports Litigation Alert. “For instance, I am well aware of many real estate companies, some large in size, focusing on developing what they refer to as sports divisions, focusing on securing and servicing the professional athlete’s particular needs. While there is no problem, and perhaps even a reasonable benefit conferred to professional athletes, in relation to specializing on a particular marketplace (i.e., the servicing of professional athletes), professionals within these industries should be careful about the language used in advertising and promotion, the conflicts of interest that may be created and the ever-changing state regulations surrounding the servicing of athletes.
“Specifically, partnering with agents and agencies may pose a grave problem to not just the financial professional, but also the agent. Agents are very wary to directly associate with any financial professional, as it may enhance their potential liability should something go wrong with a client’s financial affairs. It could lead to the agent’s loss of the client or worse, such as the player pointing the finger at the agent for wrongly insisting that the player do business with an unscrupulous advisor. Further, agents like to receive business from a variety of sources and will likely not want to limit it to one financial association. Separately, financial advisors will be hard-pressed to find an agency that wants to ‘share’ its clients with other agencies.”
Heitner added that “sports agents are conservative by nature. They are always on guard of client stealing, legal threats and the potential of opening the door to liability concerns. Especially in today’s litigious society, many agents will refuse to have a close association with any particular financial advisor.”
