Many of the youngest Americans to become self-made millionaires this year, student athletes, may also be among those least prepared to keep or grow their newfound riches.
Thanks to a 2021 NCAA rules change that allowed young athletes to benefit from deals monetizing their name, image and likeness (NIL), opportunities now abound for them to augment school contracts with even more lucrative deals off the field. But juggling contracts in the largely unregulated NIL world, while performing on the field and handling other aspects of young adult life, can be a tall order for these students; many come from historically disadvantaged communities with low financial literacy, and are vulnerable to exploitation or scams.
Read more: Big NIL deals bring cash — and alarms about financial literacy
This means it’s urgent for advisors to step in early to prevent that, according to Drew Freides, a Barron’s top-ranked private wealth advisor at UBS who includes athletes among his clients.
“Historically, it’s just been, okay, you sign your rookie contract when you’re a professional athlete, and then you’ve got your various sponsorships and deals,” Freides said in an interview. “But this pushes that time frame up to college and in some cases, high school.”
UBS posted a public white paper in mid-September called “The NIL Playbook,” which aims to establish the legacy Swiss wirehouse’s credibility with athletes in their early stages of wealth-building. The paper, written in a consumer-friendly tone, outlines key financial steps for athletes to take: seek education around basic finance skills like banking, understand the time value of money and role of compound interest in investing, watch for NIL rules that vary by state and school, build a trusted support team, treat oneself as an entrepreneur, manage one’s brand, prepare to pay income tax and evaluate insurance options.
Read more: 12 tips for financial advisors on working with athletes
“This is a great time for the whole industry to take a deep dive … on teaching their student athletes the basics around finances,” said Wale Ogunleye, the head of UBS’s Athletes and Entertainers client segment, in an interview about the paper, which he said the firm offers as a self-education tool for young athletes in addition to the financial literacy seminars it delivers to athletes at colleges with big sports departments.
“Ninety-nine percent of these young men and women will not make it professionally. So let’s let them leave universities with a skill — maybe knowing how to budget, knowing what a credit score really means. Maybe understanding why they shouldn’t get that credit card, just because it came with a free pizza on campus,” said Ogunleye, a former NFL pro athlete himself.
As the fast-changing NIL landscape leaves many young athletes struggling to understand the rules, and the new school year brings fresh NIL deals, advisors can differentiate themselves by offering timely suggestions that set athletes up for long-term success.
Below are six tips from experts for NIL planning.