[SOUND] Well going back to a big baseball practice, big football practice. We're going to talk about tennis a little bit too. But it has the advent of more and more guaranteed contracts in baseball. So to change that since you first got into business. >> Yeah. >> Change that whole. >> Sure. >> The economics of it. >> You know we're talking back when I started in the, early 80's the minimum wage in baseball was $68,000. 68,000 bucks. So and again keep in line players only get paid during the season so you know, October 15th, there's no check. You know I gotta wait till April. So, there was a fear factor somewhat involved there now. That, I need to maybe sign a multi-year deal little bit earlier and such, because just where salaries are. Now the minimum wage is $500,000. Half a million bucks. So, you know, that's a lot of money. No matter what you do today. So the urgency or the fear isn't there as much as it was in the past in terms of signing a bad deal out of the box. And especially with the signing bonuses, some of these young men in baseball now are securing, coming out of high school or college as well. You know what? I got some money in my pocket. I'm feeling good about myself. I have some disability insurance that my financial guys provided for me. I'll roll the dice and I'm not going to take the first deal. And we've seen it now with, Justin Masterson. >> Yeah. >> Turned down the Indians, deal and depending upon what happens this season he could be traded. Because he doesn't appear to want to sign a four year, I think it was a four year contract the Indians offered. He's looking more for five. Scherzer Detroit, another guy turned down a monster deal for hopefully a 200 or 300 million dollar deal if it's out there out not. So again, things have changed over the past 30 years just because the amount of money these guys are making earlier and because of the higher minimum salaries. >> We talked offline Kasey Closs alone this year had guaranteed for Kershaw and some of the others many hundreds of millions of dollars, Now I know you still work with a lot of those types of baseball players, without naming names. How does that? Do you let them take more risks Johnny? Are you still sort of playing for the long haul? >> Yeah you know again when you have a 200 or 300 million dollar guarantee contract you, you definitely can afford. >> [LAUGH] >> To take a managed risk on it. Because that obviously when you get your highest returns. But again, it's all managed risk. You know, if a guy wants to splurge and buy a ranch, it's hard to say no when you're guaranteed that type of money. But it is incredible what these guys are making. But one thing they have learned though, is taxes. [LAUGH]. >> Yeah, right. [LAUGH] [CROSSTALK] What is this tax thing? >> Exactly and you know now rates are 40% at the federal level. If you're playing in California it's 13.3 you add your agent fee which is anywhere from 3% in football to 5% in baseball. Math adds up real quick, so you know, you're not even taking home half if you're playing in California. You're probably taking home close to 45% or even less. So these guys learn about taxes really quickly. >> That first pay check, we used to see it, they'd say wait a minute [LAUGH] >> Who's this FICA guy? >> Who's this FICA guy? Right? >> [LAUGH] Yeah. >> FICA's stealing from me. >> Right. Exactly. And now we got Medicare tax, and you got Obama surtax, and all these additional, taxes out there, these stealth taxes. It's definitely impacting these guys, and they're noticing it. So. >> Tax on passive income. >> Yeah. >> To help pay for affordable care. >> Yeah. >> Do you still recommend generally, not specifically, a Florida domicile or Texas for tax reasons? There is what's unique, and give you some history on that. As it relates to football and baseball. We all know that the terminology signing bonus, I'm getting a signing bonus, and unless, and you probably remember this, Peter, you need to have specific language within the signing bonus. That makes it non-refundable. >> Right. >> In such where it's truly not taxable then, in the state where you're playing. >> Right. >> So in that case, it benefits you to have a Florida domicile or a Texas domicile. We have an opportunity right now with a young man, he's a high school pitcher. He could be top five pick coming out the high school draft. He's from southern California. So, you know, a lot of advisors now are pitching, you need to move to Nevada, you need to move to Texas, you need to move to Florida. And we're kind of coming in there with a different angle where the ultimate goal here is to get to the big leagues. And have a successful career. And get there quickly. And if it's going to help you to get to the big leagues sooner by staying in Southern California, being with your family, being with your support group, your trainers, everyone that's kind of gotten you this far why would you want to change that? To save taxes short term. Are you really going to move to Florida as a 18, 19 year old? Really spend time there? I don't think so. Do you want the state of California looking over your shoulder? Where three years down the road, you get that letter for residency audit from California. You know with modern technology now, you can track somebody [INAUDIBLE]. >> Whereabouts rules, yes. >> Now in terms of your credit card, your ATM use, your cellphone. So they're going to figure out pretty quick where you are or where you aren't. And that's going to blow up real quick. So the parents seem to like that approach more than, let's move Johnny to Florida to save taxes here short term and such. The other thing in terms of calling Florida home or Texas home, there's something called duty days. >> Mm-hm. >> In professional athletics, where your income is allocated to the state that you play. Based upon your duty days. So, let's use you know, Cleveland's favorite son now, Johnny Manziel, right? >> Right. >> Johnny as we all know is from Texas. Calls Texas home. Wow, he shouldn't owe any Ohio tax, right? Because not true, because the way Ohio taxes you as a, and assuming he keeps his Texas residency. As far as his Brown's income is, including the signing bonus, it's going to be based upon a duty day allocation, which your denominator is the number of days in the football season, which basically starts when training camp starts. And your numerator is the number of days that you're in Ohio. So if you think about it, outside of your away games [CROSSTALK] and a few exhibition games. You're in Ohio 90, 92% of the time so, Ohio's going to still tax Johnny on 92% of his Browns' salary even though he may call Texas home or call Florida home. He could play some games with his off the field [CROSSTALK] income in terms of setting up an entity in Texas. And where those signings being held with all those autographs being signed. Are they in Texas, are they in Ohio? Again as you know, the world he said he would get would be sited to his home state. So there's the opportunity to avoid Ohio tax in terms of off the field, but in terms of his wages from the team. Over 90% of that will still be taxed by Ohio and the city of Cleveland here as well so. [LAUGH] >> Well as you go through the career, let's talk about the off field stuff. Again everybody's seen it, it's public. Peyton probably the number one spokesperson for every category that makes sense for him. As the financial advisor, is there a point at which you say, that's too much, it's deterring you from maxing out on the field. Just using that again as a hypothetical. >> Sure. >> You say, make it while you can. Get every endorsement you possibly can. >> Going back to the early days, we kind of had an understanding that we were going to let corporate America pay for your lifestyle, and whatever you make between the white lines on the field goes to savings. And Peyton was on board for that. And it's worked incredibly well for him. I mean, you look, he is the poster child for endorsements and such. But I think, what happens early in your career, you kind of take everything that maybe comes your way. And then as you get a little bit older, you can get a little bit more selective in terms of branding. And he hates that word, he doesn't like to be called a brand. Because a brand is not a, I'm a person, not a brand. Okay? >> Right, right. >> So he corrects me all the time. But it's now creating long term relationships with specific companies and industries and such. And he's been a Gatorade client forever, and I think when the end comes, he'll continue to be a Gatorade ambassador, no different than what like someone like Michael Jordan is. So, I think what happens, Peter, is you kind of narrow it down as your career kind of becomes more focused and such and you do less but for more in terms of your endorsement opportunities. And a lot of players think they're great public speakers, Peyton is a very accomplished public speaker and he really enjoys public speaking and he'll do a number of speeches through out the year as well. To compliment his kind of off the field, other off the field commercial endorsements, so. >> Did he really take acting lessons? [LAUGH] >> no. >> You don't have to say. It shows. He's gotten a lot better over the years. >> He's a natural, he really is. yeah, he gets it, you know. We all use that, that terminology. He does get it. He get's it, he understands it. But he's also unique to and I've heard these stories where you know he will make if the appearance is an hour, he'll stay an hour and half. He'll stay two hours. When he was in Indy and Reebok, he had an office there, in a warehouse. Couple times he'd go and just visit the warehouse guys and bring pizzas and kind of gel with folks, you know? He'll make phone calls around Christmas and call CEOs and thank them personally for the past year and the relationship and such. So he understands it, he gets it. And that's what makes him successful both on and off the field. >> Was it Papa John pizza? [LAUGH] >> Exactly. [SOUND]
