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Periodic insights from our Investment and Private Client Teams on a broad range of investment and advice-related topics

The Game of Life: How KJ Harrison is Helping Professional Athletes and Their Families

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Published by Mike Jaczko, Partner & Portfolio Manager at KJ Harrison Investors and Robert Martini, Associate Portfolio Manager at KJ Harrison Investors

Many young players dream of a career in the big leagues. For a select few, it turns into a dream come true – one that follows years of sweat, dedication and sacrifice, from themselves and their families. Turning pro is also a significant financial event which presents opportunities and challenges when it comes to managing often-newfound wealth, plus planning ahead to support your life goals when your sports career ends. KJ Harrison is here to help players capitalize on this unique opportunity.

Mike Jaczko, a partner and portfolio manager who has worked extensively with professional athletes, and Rob Martini, a private client analyst and former elite-level hockey player and coach, describe KJ Harrison Investors’ unique advisory service for professional athletes and their families. As Mike says: “We manage risk – risk inherently associated with professional athletes’ lifestyles and the individuals they associate with.” In the following Q&A, Mike and Rob talk about the challenges young athletes face today, their passion for helping players, as well as the KJ Harrison multi-disciplinary approach to supporting clients and families.

What motivates you to help athletes, especially pro or soon-to-be-pro players?
Mike: I have an appreciation for people who can do something at a world-class level, particularly athletes, but I’m also a protector, and when I look around at hockey, in particular, I see that there is still a bit of a meat-locker approach to these young people in the industry and we want to help. Our team at KJ Harrison are wealth experts with a deep sports background, and we’ve honed our approach for the benefit of players and their parents. We want to make them aware of the risks and rewards. Our goal is to level the playing field, to arm the player and their family with knowledge – and to protect their wealth for years to come in a way that’s aligned with their life goals.

Rob: I’ve spent my entire life around the game of hockey, so I know the emotions and the pressures that players encounter. I want to share the knowledge and strategies that I have learned, that are proven to help players make better decisions and enjoy positive outcomes, so that they can dominate their sporting world – not have the sport world dominate them.

You once considered a pro hockey career, Rob?
Rob: Coming out of high school in Canada, I earned a scholarship to a U.S. college with a Division 1 hockey program. After my four years there, the NHL was on strike but I had offers to go to camps with lower-tier pro teams. But I was also doing well in my economics class, and my roommate in college had just missed the entire season with a concussion. So, I chose to change gears completely, and joined a finance start-up in Singapore. I stayed close to the game, including coaching Singapore’s national team, which was a rewarding and enjoyable way to stay involved. I later moved back to Toronto and joined KJ Harrison to bring together my two passions: hockey and the business of finance.

We’ve all heard stories of athletes being taken advantage of financially. Is that ancient history?
Mike: Unfortunately, no, at least in certain corners of the professional sports world. The minute many players show promise, they become targets, in some cases for investment advisors, player agents and even friends and family who may see dollars signs. A prime example is former Toronto Maple Leaf, Bryan Berard, who lost millions to a fraudulent investment advisor. At the age of 17, agents started courting the up and coming star, all eager to help manage his money. He and his family chose a financial advisor they thought was looking out for his best interests – alongside many other players – and eventually that advisor was charged with fraud and his clients lost millions.

https://www.ctvnews.ca/w5/how-a-former-nhl-star-lost-millions-to-a-fraud-involving-an-unscrupulous-financial-adviser-1.3310105]

Rob: And that’s just one of the most recent visible examples. There are so many other circumstances where there’s nothing illegal going on, yet players are talked into investments and products that are not in their best interests.

Mike: The risk isn’t just that they might be taken advantage of, but they might be tempted to make decisions that won’t help them in the long-run. The minute some players sign an $800,000 entry-level contract, they buy their first sports car and a house and a cottage, and then their personal balance sheet is already tenuous because they’re leveraging future earnings. That’s a big red light.

That speaks to some of the unique risks players face when they come into money. What else should athletes be aware of?

Rob: These athletes have an inverted income pyramid. Most people learn how to handle money, conduct business, invest and protect themselves while they have small sums, and then as their career grows, so does their income. In contrast, athletes make the majority of their money very early in their lives. That presents a whole host of challenges and opportunities, so we work with them to develop the skillsets to capitalize on this unique set of circumstances – not just for the short term, but for their entire lives. After all, they’re only one hit away from losing their future earnings so we give them the skills they need to have the lifestyle they want and maintain it for their entire life. Not just their athletic career.

What should parents of a promising young player who’s on track to turn pro do to support them?

Rob: The biggest change is that the fruits of your labour are no longer predetermined. Everyone in major junior makes the same money and education package, for the most part. Everyone in the NCAA gets generally the same scholarship. Now, you’re going to be fighting for everything you get; all the way from unfathomable wealth, to being out of a job. You need a team of people around you to help you in that fight. It is critical to surround your child and yourself with good people who truly have your best interest in mind. Advisors, agents, service providers and associates all need to be vetted, and you need to have a reliable process to accomplish this vetting.

What steps should athletes or their parents take before committing to a particular career path?
Mike: It is important to do your homework and always check references. The goal is to find a trusted advisor who is prepared to work with you, your family and – very importantly – with other advisors. You need to find someone you can trust as a career coach, someone who actively listens to you and is prepared to educate and protect you and your interests.

How can the team at KJ Harrison help?
Rob: As they move up in their career, upcoming and professional athletes have access to the best people in the world to teach them how to think about their game. Working with us, we will show the athlete how to achieve the same world-class level results in life. Whether it’s protecting what they’ve earned or setting themselves up to be successful after the buzzer sounds on their sports career, we work to develop a framework that empowers them to be able to make decisions today for the future.

What’s your approach to providing that framework?
Mike: Our firm has worked with high net worth and successful family businesses for decades now. We want athletes and their parents to think of themselves as a family business. You might think that as investment managers, we just manage finances, but it’s more than that. Our team collaborates with other advisors to bring expertise in legal and tax resources, and to understand the nuances of contracts and collective bargaining. We also offer the advantages of multi-class asset investment management, with a strong view towards long-term wealth preservation. Our multi-disciplinary, comprehensive approach is the cornerstone of how we relate to families, athletes and their advisors.