What Athletes Lose When They Choose A Big Wirehouse | Zach Miller, Erik Averill | NFL Players' Podcast #4
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Episode Summary
You’ve likely at least had conversations with them – Goldman Sachs, UBS, Merrill Lynch, Wells Fargo, Morgan Stanley – but are these big wirehouses the best place for you to build your net worth?
As a professional athlete, you’re in a unique situation, and the reality is that these mass affluent broker-dealers were not built with you in mind. Your unique situation deserves a unique solution.
In this episode, Zach Miller is again joined by Erik Averill where they discuss specifically why these firms are not equipped to handle the complexities that an NFL player’s financial situation demands and what you should be looking out for instead in a firm that can have your best interests in mind.
Episode Highlights
Why are wirehouses not a good solution for NFL players? (00:59)
“That's the case with those wirehouses, the UBSs, Morgan's, Merrill's Goldman Sachs. They're not a fit for athletes and they never will be. They try to do this, they will start an athlete division, athlete and entertainment division, and they'll put a former player as the head of it. It's truly a disservice to the players. It's a disservice to NFL players in particular because, at their core, they're just asset managers that do portfolio management and they might tease you and say they have access to some proprietary products, which are just repackaged financial products by that company.” -Zach Miller
Why big brokerage aren’t necessarily equipped to provide you the best solution (3:14)
Zach’s issues with the NFL PA financial advisor program (5:57)
The solution for the masses vs the solution for the pros (7:57)
“Think about who sponsors bowl games, who sponsors the plastering inside the stadiums, you'll see a Merrill banner, you'll see a Morgan Stanley banner, you'll see a Northwestern mutual banner. I always ask [players], ‘You realize that they're actually advertising to all the fans sitting in the stadium.’” – Erik Averill
Why you should demand the best (10:09)
The signs to look out for when trying to spot a broker-dealer (10:55)
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+ Read the Transcript
Erik Averill (00:00):
Hey everyone. Welcome back to the NFL players podcast. We are Zach and Erik, and we ended last podcast talking about what was a multifamily office. What are the wealthiest people in the world do to optimize their net worth? The difference between what unfortunately, most individuals end up choosing as a brokerage firm, the big wirehouses - the Morgans, the Merrills, the UBS, the Wells Fargos, - and really why that makes no sense, not only for an athlete, but really for anybody, and Zach I'd love to hear what are some of these unique needs that an athlete has that just do not fit the business model of the mass affluent wirehouse?
Zach Miller (00:59):
Well, the biggest thing that wirehouses do is they do retirement planning for much older people. They're not working with clients that are young, that have a large amount of income really early in life. And like anyone who remembers when they're young, you make a lot of mistakes, financial and otherwise. If you don't have the expertise in working with young athletes in particular, you're just not qualified.
That's the case with those wirehouses, the UBSs, Morgan's, Merrill's Goldman Sachs. They're not a fit for athletes and they never will be. They try to do this, they will start an athlete division, athlete and entertainment division, and they'll put a former player as the head of it. It's truly a disservice to the players. It's a disservice to NFL players in particular because, at their core, they're just asset managers that do portfolio management and they might tease you and say they have access to some proprietary products, which are just repackaged financial products by that company.
They're not anything special and they're definitely not going to get you any type of excess return. The biggest takeaway from that is the fact that you have a specialized situation, you're not like everybody else. You are a unique situation and you just need to recognize that. I would have benefited greatly in my own circumstance from realizing that earlier on than I did and found someone that it wasn't ... someone like me that had the type of knowledge and someone that can surround themselves with a team.
It's not just about me. I wouldn't even want anyone to hire just me, it's about hiring the team of individuals that can really advise you to grow your net worth and to maximize your potential and realize all that human capital that you have the potential of earning and then essentially achieving goals. It's simple as that. The hard part is making those decisions when they matter most, early in your career.
Erik Averill (03:14):
I love all of that. One thing that is unique about here us at AWM, is we're a banded a group of reformed brokers in the sense that you are a client of Merrill. I was a client of Morgan Stanley, became an advisor at Morgan Stanley. We have another advisor, who's a certified financial planner now who left Merrill. We have an advisor that left Wells Fargo.
We're not guessing about the inner workings. We've seen how the sausage is made. It's a big reason of why we left. It was very clear early on that that model was just not built for the wealthy complex individual. When we talk about limitations, one of the biggest ones that we point out is, once again, it doesn't mean that the individuals that are working at these companies are bad people. They're are some of the greatest people.
The model of Wall Street just isn't built to serve the best interest of the client. As an athlete, you're in the highest tax bracket, you had talked about 50% of your dollars being eaten away at taxes. Yet, if you look at the bottom on their websites, what's it say? "We do not provide tax or legal advice."
So you have your deemed financial advisor, which is a hilarious term in itself because it's generic, there's over 300,000 people that use that term. It's literally like if anybody just called themselves a doctor, it would be frightening. We see this is, they can't provide tax advice, yet the thing that's eating the most at your wealth is your taxes. Another thing that we see is on the disability insurance side. As a professional athlete, we know this, one of the biggest risks to us reaching our human capital is injury.
It could be permanent injury, it could be temporary injury. But you want to make sure that you have the best solution available to protect against those things. There are six carriers when it comes to athlete disability insurance that are backed by Lloyd's of London, which is a very specialized market that deals with athlete disability insurance.
Here's the kicker, these big brokerage houses, they're not going to look at all six options for you. They have an agreement with one company, which means you're not going to get the best option. You're probably not going to get the best pricing. We see these types of conflicts over and over again, that they're just not built for your best interests as an athlete. Yet, the hard thing is these brands are being pushed in our face. So as an NFL player, your PA is essentially co-sponsoring some of these brands recently.
Zach Miller (05:57):
Yeah. The NFL PA does have a financial advisor program and it has not gone well. There's been multiple ... It's sad though, because there's so many advisors that have come out of that program that have been later sued for fraud. So it's not actually evaluating ... It's not doing a good job of only finding advisors that are reputable, but it's also now led in all the major brokerage houses to give access to athletes and basically have a rubber stamp approval just by being an advisor at that firm.
They went ahead and passed the requirement to have a certified financial planner designation, or a certified financial analyst designation. Sorry, chartered financial analyst. They'll get mad at me for that.
Erik Averill (06:44):
The CFAs would light you up for that.
Zach Miller (06:45):
Sorry, don't any of that. Those are the two decks designations that they recently required. Then they postponed for ... I don't know why it took them so long to get those designations in the first place as just a requirement, because if you're going to be the best in representing NFL players, why wouldn't you already have one of those certifications or designations?
Then the second part is they push that out to 2021 and then let in these brokerage houses, which if you're at one of those places, now you don't even care about the designation or certification because you can just be at the firm and have access to players. The program has not gone well. I think this is kind of an attempt to try to save it.
I don't know if they don't understand that the NFL PA, the fiduciary standard, I don't understand if it's that difficult to find advisors that will do what's in the best interest of the players, of the clients in the NFL guys. It's not that hard, in my mind to, to just do what's best for the player. Even if at that comes at a cost to yourself, but apparently the NFL PA feels otherwise.
Erik Averill (07:57):
Yeah. As an athlete, I always talk to our guys about it, is if you take a step back and look at the advertising and stadiums, right? Think about who sponsors bowl games, who sponsors the plastering inside the stadiums, you'll see a Merrill banner, you'll see a Morgan Stanley banner, you'll see a Northwestern mutual banner. I always ask them, "You realize that they're actually advertising to all the fans sitting in the stadium."
The reason they're paying hundreds of thousands, millions of dollars to universities and to professional teams, is to capture the eyeballs of the watching world, the millions on TV. So, as an athlete, are you really going to accept the advice that's meant for the millions of the massive fluent for your complex situation? You would never do this, right?
We know how important this is on a medical standpoint. You went through multiple injuries, right? You guys do car wrecks every play, so I know the NFL is very familiar with surgeries. Think about what you do as a professional athlete. You tear your ACL, right? Or as a pitcher, I had Tommy John surgery, I didn't roll down the street to the local orthopedic surgeon who happens to actually be far more qualified than any financial advisor, right?
We're talking about undergrad, we're talking about medical school, we're talking about residency, a medical ethics board, continuing education. The reason we have so much trust in the medical world is it would be terrifying if anybody could call themselves a doctor. Even with how qualified these doctors are, you don't just look for the orthopedic surgeon. You look for the best. You look for Dr. Andrews, who has years and years of experience of putting successful products back on the field, right? There's too much to risk. You don't go to the chop shop down the street, right? So why are you going to take your money to the massive fluent shop down the street?
Zach Miller (09:58):
It's a prime example of myself. I had three ankle surgeries, and I flew to North Carolina to have it done, to see Anderson, the best foot and ankle guy in the country.
Erik Averill (10:08):
They didn't have any doctors in Arizona, huh?
Zach Miller (10:09):
You don't use the team doctor. You don't use the guy the team recommends because you want the best. There's so many parallels that you should always demand the best from who you're seeking out. The doctor comparison is so true because you find the best surgeon or doctor when you have to go get an injury fixed.
You should treat your financial life the same way. You should demand the best, you should find the best people that have the most expertise at repairing an athlete's knee. You do that with a doctor, you should ... Your financial situation, you should find the best that can help you with the expertise and the education and the proven methods of getting it done. You should demand that for your financial life.
Erik Averill (10:55):
Yeah, absolutely. For you guys listening in is being able to ask the question, "How do I know if somebody is a broker or not?" When we talk about an independent company, a multifamily office versus a broker is, it's really easy, you go on their website, you should be able to see it, the disclosures at the very bottom, if they have anything that says member FINRA, F-I-N-R-A ... We'll put this in the show notes.
On the business card of an advisor, it's going to say Registered Representative. It means that they're actually a broker, they're representing the firm in which they work for. That's a huge sign. They don't have what's in your best interest and that you need to seek an independent advisor.
The great news is there's tons of options available. We'll get into the alphabet soup of designations. You've heard us talk about the CFP, the CFA, and what these really mean to you. We'll make sure it's all in the show notes. We've got a guide on who's qualified to be your financial team that you can download. So until next time, stay humble, stay hungry and always be a pro.