[MUSIC] Today we're going to look at managing the peak professional athlete. We're going to look at it through the eyes of the most experienced, and I would say the most successful financial manager that I've ever come across in my many years of practice in this area. His name in John Palguta. Used to be with me at IMG. You'll hear John talk about the various stages of an athlete's career. He will talk to you about how do you protect against a career threatening injury. How do you develop an income producing opportunity as some of these superstar athletes head towards the end of their careers. John has rich experience in managing careers from the beginning, middle, and end, and into the post retirement years, which is really the essence of what representing a professional athlete is all about. We'd like to welcome John Palguta here, a dear old friend from IMG and MAI days. John we have your bio, thanks for being with us. We're going to talk about the evolution of the pre-professional athlete, through and including his early years into his mature years, and then beyond that into his retirement years or her retirement years. First, let's just start with that pre-professional athlete who needs financial advice, because he's still an amateur. He's thinking of maybe going pro can he have a financial adviser without losing his eligibility? >> Sure first of all, thanks Peter for inviting me. I'm excited to be here and, and, and present for the class. To answer your question specifically, as an amateur, whether you're a high school baseball player, or college baseball player, college football player, you are allowed to have a, financial adviser without losing your, college eligibility. So it gives the financial adviser somewhat of an early in as it relates to meeting a family and, and, and trying to gain their trust and such during this, this whole process. >> And John, you've been at it, I've worked with you [COUGH] over many years. Trust, is that really the key factor with any new client, as the network that your track record at this point that gets you the superstar clients that you have? >> [LAUGH] Well, yeah. It's that helps. [LAUGH] So it's, it's, it's valuable, you know, working with some of the athletes that, that you're well aware that we do work with. It gives you the, the credibility that will get you in the, in the front door, or, have someone return a phone call, or an email in, in such. And then, kind of getting in there and, and then you know, gaining that, that, that, that trust and comfort with the family and think we were talking, previously Peter, sometimes it comes down to, you know, comfort. Trumping confidence many times where you, you know you are most confident person but for whatever reason maybe they feel more comfortable with, with another group or another person. And, and you miss out on that opportunity. So it, it's real important to develop that comfort with, with the family and also the, the young man because I've been on more than a few presentations where you, you come away from the, the presentation. You're like wow, the, the mom really loves me. >> [LAUGH] >> I feel it. And the old saying is I've never seen a mom play. >> Right. >> So [LAUGH] you really gotta get that, that player to believe in you and, and have that connection. So. >> And really we were saying before we went on. On-line here, so it's really your relationship, your trusted long-standing relationship with some of the best agents in the business on a referral basis that has led you have, in large part, your current client base. >> Yeah. >> Is that a fair? >> Yes, that is true. You know, back in the ING days, in, in our glory days and such, you know, whether it was football or baseball, it was agents. You know, provided that introduction and, and such. And in many cases it was a competitive situation where you know, we weren't you know, handed over the client by any means, but we were one of two or three groups that you know, the agent recommended that, that we interview. But again, because of you know, our level of expertise in all the, the multitude of services that we can provide, all in house. We had, we had more wins than, than losses in that regard, but truly it's the agent, that, that, in many cases is the first point of contact that, that leads to the, you know, a warm referral. >> Hypothetically, how do you start talking about, setting up and the first time in the making for life? >> Sure. So, we started working even then securing the disability policy, you know, facilitating the, the premium, borrowing the money and such, and, and protecting its career there. Then ultimately when he was drafted, really used the same blueprint that was setup by, kind of Andre Agassi, quite frankly. Where you have the athlete, you have the athlete off the field, and then you have his foundation, and you kind of combine those three to kind of three situations that ultimately lead to, you know, financial success at the end of the day. >> You hear 70% or more of NFL players, they're not for long, till they end up going, going. >> Sure. >> Broke and I know it's never happened at IMG AMI. Got it, thank God. >> Yeah. >> But just general strategies, what do you avoid? Maybe let's start with that. >> Sure, you know, the biggest concern today we, we find, is where athletes will personally sign on a a document where they personally guarantee promissory note, note with a bank and they truly don't understand what that means. And, and a lot of the horror stories that you specifically read about today are because of those very issues where a an athlete will enter into a real estate deal basically be the money guy, the real estate guy. He's really getting a promote or doesn't have any skin in the game. And, and the athlete ends up again personally guaranteeing the entire project. So you need a, a team of advisers, you know, beginning with a lawyer you know, CPAs insurance people and such to really review the documents that these players athletes, clients are presented to sign to truly vet the deal and understand and explain to them, this is really what you're signing. And, and in worse case, if this project goes belly under, you're writing a check at the end of the day. So you know, we have been successful. It's always been a rule going back to even the Bill Carpenter days. >> Yes, yes. >> You know, you need to get a lawyer involved in every real estate transaction. And, and we still adhere to those rules today. And you know, a lawyer can be your best friend in terms of providing that prevent defects. >> Yeah. >> To prevent a, a horrible situation. >> We talked off camera about poor Bernie Kosar, for Mark Brunell over and over you see a real estate deal. Put it the other way again, cut neck confidentially. Hypothetically you want transparency with investments. You want public accountability, right? You don't want, oh gosh, you know, I'm just going to buy this little piece of property and hope for the best, right? >> Right. You know, whether it's an athlete, or anybody, you know, these guys make an incredible amount of money in a short period of time, and some guys have a long career. There's others that we all know that have a relatively short career for a lot of different reasons, whether it's injury or skill. So you, we like to basically create, if possible, their own personal Fort Knox or, or bunker money, as we like to say, in terms of a, of a tax-free, mutiny bond portfolio to, to generate that passive income, you know, when the paychecks stop. And, you know, back in the day when interest rates were much higher than they are today, you know, I used to tell a guy if you had 5 million bucks and you could earn 4, 5% tax free, you're set for life. Now with rates at 2 and 3%, that 5 million now needs to be maybe 10 million, maybe 15 million to really create that, that bunker, that personal Fort Knox, to provide for you and your family, you know, post career and such. So you know, things have changed because of the current market and interest rates and such. But that's generally our, our philosophy in terms of you know, creating transparency because, again, having a brokerage account, you can see your holdings and such. Unlike, you know, some of the investments that guys, you know, sexier investments like a hedge fund and such where there is it the trans-period, or transparency, or real estate type investments or restaurant investments, things of that nature, so. >> And, and lending your name rather than being the money guy? Doing a license on a restaurant rather than owning the restaurant. >> Absolutely. Absolutely. And I think, you know, you, you found a lot of athletes have, have used their names to generate royalties versus owning, having direct ownership in something and, and assuming all the risk as well. So. >> I don't know Arnold Palmer maybe being the best example. >> Yeah. Absolutely. Absolutely. >> Yeah, the licensing- >> Yes. >> Of the logo even along with his name. >> Yes. Yeah. >> But, but let's go back to that. I know MAI has a tremendous high net worth client-based, again, we won't ask anything confidential, Tom, but, but how, how is it different from an athlete who could end a lot sooner than a CEO of a major Fortune 500 company? >> You know, again, you know, being an athlete, whether you're 18 years old coming out of high school or you're 21, 22, you know, coming out of college. Everyone has dreams. And there's a kind of a career path that, that you go through and such. And, and generally you know, when you're drafted it's about you- >> Mm-hm. >> And, and, and your success. And then maybe you get married and then you have some, some children and you have some success. And then it's more about, oh, and now I've got a wife to worry about and a child. And then you get a little older and you've been in the league for awhile. And now your kids are you know, eight, nine, ten, maybe teenagers and they miss their dad. >> Mm-hm. >> And you kind of go through that kind of career change, where now, you know, I'm, I, I think I have enough. I'm ready to retire, and, and, and move on to something, something different. As a corporate executive, you could work till you're 65, and, and even longer. As a professional athlete, I mean, even Brett Favre found out, it does end. There's no you know, career, there's no senior NFL. >> Mm-hm. [LAUGH] >> And so you have to kind of combine you know, maybe a decade of earning power and savings into what a corporate executive can accomplish over 30 or 40 years. And, and that's extremely difficult because you know, we live in a society of wants- >> Mm-hm. >> Sometimes versus needs. And, and you know, athletes fall into that you know, situation sometimes where it's about the material things. So it's important. You need to educate these guys and have them focus more on, on the needs versus the wants. And then living below your means instead of at or above your means because the salary you make, because when it ends, it ends quickly,. >> Mm-hm. >> And, and it ends fast, and sometimes not on your terms, so you need to be prepared for that ultimate, you know, day, when it, when it does end. >> And, you know, how do you talk a Curt Schilling out of risking almost all of his, net worth on a video game, is that part of it, hey, was it great. Not to, you know, Curt Schilling's a great guy, I'm sure, but I'm a great baseball player, I can be a great video game producer. Is that part of the challenge? >> It is, and, sometimes in, in football especially, it's kind of the might makes right philosophy, where I'm bigger, I'm stronger, I can talk louder, and I can pound my fists. >> [LAUGH]. >> So I'm going to be successful I, I just know it. And you know, what they forget is that there's a lot of smart people on the other side of the transaction too. And that's why you need your advisors to be counseling you the entire way. I'm not privy to curcheiling and what may, what did or didn't happen there. You know, it's quite possible his advisers told him, hey Curt you know, this is what could happen and, and we've been there, Peter. >> Yeah. >> When you'd advise clients and at the end of the day they're still going to, it's their money and they're going to make a potentially bad decision and in many times, we have terminated relationships where. Again, I use the analogy, you go to the doctor and the doctor says you got to stop drinking and smoking, and lose some weight. Otherwise- >> Right. >> You know, we're going to have another conversation. And if you keep coming back and you see the same results, meaning there are no results, you probably need another doctor or the doctor is going to tell you to move on and, and, and we've done the same with clients. Not every client is a good client. >> Right. >> And sometimes it's difficult to terminate relationships but sometimes you have to because they just refuse to listen and- >> Or, or, or we've seen it the other way they terminate you and you're just as glad. >> Yeah. >> That, that happened and you have a nice waiver in your file. >> Yeah, absolutely. >> [LAUGH] Protect yourself. >> And that's okay, it's, it's okay to lose clients occasionally and the revenue that's associated with it as well because you just kind of know intuitively that there is, they're, they're headed for a a, a bad outcome so to speak. >> Yeah. >> And, and you want to be as far removed from that as, as, as possible because what happens then is ultimately the client will come back and say, why didn't you advise me? Or, you know, you must have taken my money, I don't have it anymore. >> Right. >> So, you, that's the position we all want to avoid. So. >> We, we hear and read about all these horror stories John where the money is stolen, fraud, theft; embezzlement. Black, you know, Kirk Wright. You know, how, how does that happen, generally? Never at MAI, never at IMG back in the day. And athletes just listen to the wrong voices at the wrong times. Steve Atwater lost millions- >> Yeah. >> On cluster action that was unsuccessful. >> You know it's power of attorney. You know, it's, it's a very serious document when you give somebody power of attorney, whether it's financial power of attorney, or healthcare power of attorney, or, you know, power of attorneys related to signing real estate document, whatever. And, you know, a lot of these young men will sign that power of attorney. And, you know, a lot of advisers will take advantage of that and, and that's exactly what's happened in those instances where you know, the advisers probably enrich themselves to the detriment of the client by using this, this power of attorney. And I think it happened with Vince Young. >> Yes. Lost his, all of his money. >> Lost all of his money as well through an adviser that had power of attorney and put him in a lot of bad deals that the adviser probably got paid on. >> Yeah. >> And ended up you know, horrifically for, for vent. So, the power of attorney, that's the most dangerous weapon out there as far as being a financial adviser. and, and having a client sign it and somebody taking advantage of it. >> Mike Tyson, Don King, classic example that we study. >> Yeah, yeah. [MUSIC]
