The Most Important First Hire Athletes Can Make: A Trusted Financial Advisor
- Jan 19
- 7 min read
By Frank Simpson — former college athlete; Managing Director / Senior Private Wealth Advisor, The Simpson Firm
Why this matters—now
When ESPN’s 30 for 30 documentary "Broke" aired in 2012, it spotlighted a hard truth that had been ricocheting around locker rooms for years: a striking share of pro athletes end up in serious financial trouble soon after their careers end. The film amplified the oft‑quoted 2009 Sports Illustrated figures—78% of former NFL players bankrupt or under financial stress within two years of retirement, and 60% of former NBA players within five years—and put painful personal stories behind the math. usatoday.com
You’ll also frequently see the broader claim that between 78% and 80% of professional athletes go broke within two years of retirement, sometimes attributed to the Sports & Fitness Industry Association in popular media writeups. While that exact attribution is difficult to verify to a primary, published SFIA study, it’s nonetheless a widely repeated framing of the problem in mainstream commentary. The prudential takeaway is the same: the risk is real, and it begins early.
At the same time, the best available empirical research (covering every drafted NFL player from 1996–2003) shows that about 15.7% file for bankruptcy within 12 years of retirement—and filings start soon after the last snap. Critically, career length and total earnings did not meaningfully reduce the risk. In other words, even big contracts don’t inoculate you from bad decisions or weak planning.
Takeaway: Headline money and endorsement buzz do not automatically produce durable wealth. What does? Making smart, coordinated, early financial decisions—ideally with a fiduciary financial advisor before the first NIL pitch, the first advance, or the first pro contract lands.
Athletes make major money decisions before they hire money pros
Long before most athletes assemble a full professional team, they’ve already made several financial decisions:
Agent selection (and fees).In the NFL, agent compensation on team contracts is capped at up to 3%, with the standard representation agreement’s default at 1.5% unless both parties initial a higher amount. The NBA caps agent fees on player contracts at up to 4%. By contrast, endorsement/marketing commissions are often 10–20% and not capped by player unions. These percentages materially affect cash flow and should be modeled from day one.
Pre‑draft/NIL cash advances and agency-funded costs. Prospects routinely receive marketing advances, stipends, and paid training/housing that can total tens of thousands to low six figures—all typically recouped from future earnings or repaid via financing. This is not free money; it’s a loan or obligation that needs to be priced, compared, and stress tested.
Attorney retainers & business formation. Contracts, entities, and trademarks bring legal fees and downstream tax implications—choices that should sit inside a coordinated financial and tax plan.
NIL deals and compliance. Since July 2021, college athletes can earn from their Name, Image, and Likeness, subject to rules that prohibit pay‑for‑play and improper recruiting inducements; NIL income is taxable, and many schools/states require disclosure.
Each of the above is a financial decision—often made before a financial professional is in the room.
My vantage point: on the field and in the boardroom
I’m a former college athlete who had pro aspirations. Over the last decade-plus, I’ve worked closely with collegiate and professional athletes and their circles—including athlete groups around Lonzo Ball & LaMelo, Omer Yurtseven, and many more—first during my tenure at Bank of America Merrill Lynch, and now as Managing Director / Senior Private Wealth Advisor of The Simpson Firm.
Our role has ranged across Family Office services, Private Banking, Estate planning & Insurance/Risk mitigation, Structured Credit, Business Formation, Tax preparation & planning, NIL and Sponsorship financial forecasting and review—functioning as a Chief Financial Officer for the athlete’s enterprise.
That breadth matters because every decision touches everything else.
The single best early move: hire a fiduciary financial advisor first
Once you’re on the radar to earn—rookie deal, NIL, shoe contract, appearances—hire a financial advisor first and run all inflows and outflows through a coordinated plan. Here’s the 90‑day playbook:
Payment rails & where the money lands.
Set up an athlete operating entity (often an LLC or S‑Corp; tax counsel decides) for NIL and off‑field income.
Establish athlete‑savvy banking for liquidity, bill pay, treasury, and credit.
Spending plan & support circles.
Build a values‑based budget tied to guaranteed income; document a family/friends support policy (caps, cadence, and process) to protect relationships and your future.
Tax design, including the jock tax.
Forecast federal, state, and local liabilities, set estimated payments, and model the jock tax by duty days/games (more below).
Protect the downside.
Insurance: own‑occupation disability, life, umbrella liability, property, cyber, and (when appropriate) loss‑of‑value and appearance coverages.
Build the right balance sheet.
Hold a 12–24‑month cash reserve; implement a simple, low‑cost, tax‑efficient, globally diversified portfolio aligned to your inverted income curve (explained next).
Governance & reporting.
Quarterly cash‑and‑risk dashboards; vendor oversight (agents, attorneys, marketers); “No new check without CFO/Advisor review.”
Why athletes need a different plan: the inverted income curve
Typical professionals earn peak income in their 50s–60s and retire for 20–30 years. Athletes often earn the most in their early 20s and can be out of the league by their early 30s—a 40–60‑year funding horizon. The NBER study cited above shows bankruptcies begin shortly after retirement and continue at a high rate for at least 12 years, and higher total earnings didn’t protect players.
Planning implication: Treat your current contract as if it could be your last. Design a lifestyle you can fund on guaranteed cash, then step up only after new guaranteed deals are signed and funded. Remember: not all leagues (or individual contracts) are fully guaranteed and the money you earn has to last you the rest of your life.
Rule of thumb: Sweep at least 50% of after‑tax cash flow during peak earning years into long‑term capital, then let lifestyle trail guaranteed income—not projections.
The jock tax (and why your zip code isn’t your only tax rate)
When you earn in multiple states (or cities), those jurisdictions tax the portion of income earned there—the “jock tax.” States typically allocate by duty days or games played, and some cities add their own layer. Practically, you might file many state returns each year, with your home state providing credits to reduce double taxation. It’s a compliance grind, and planning can meaningfully improve after‑tax outcomes.
Planning conversations we have with every athlete:
Residency vs. schedule. Model after‑tax income by travel schedule and consider how residency choices interact with road‑game taxes.
Allocation methods differ. Duty‑days vs. games‑played will change the bill; keep precise travel and appearance logs.
Local layers. Certain municipalities assess additional fees on non‑residents; don’t miss them.
Agent, attorney, marketer… and advances: treat them like the financial choices they are
Agents: NFL team‑contract fees up to 3% (default 1.5% unless raised in writing); NBA up to 4%; marketing often 10–20%. Budget the full cost of representation, not just the cap‑table headline.
Pre‑draft/NIL advances: Agencies and specialty lenders regularly front training/housing, stipends, and advances. These are repayable (sometimes at steep effective rates). Model worst‑case scenarios (injury, undrafted, delayed/partial guarantees) before accepting the money.
Attorneys: Negotiate flat fees when possible; ensure counsel, tax, and advisory are coordinated so your structure and contracts work together.
What the data say: advice improves outcomes
Independent research consistently finds that high‑quality, fiduciary advice improves financial results—mostly via planning, tax efficiency, and behavioral coaching (helping you stick to the plan under pressure).
Vanguard Advisor’s Alpha®: Adopting best practices in planning, cost control, tax‑efficient implementation, rebalancing, spending strategy, and behavioral coaching can add “up to, or even exceed, 3%” in net returns over time (irregularly, not annually).
A real‑world scenario: how disciplined decisions create freedom
“Rookie RB” signs a 4‑year deal worth $6.0M; $2.5M guaranteed, plus $400k likely incentives and $300k endorsements. He lives in a high‑tax state and plays in 10+ jurisdictions. He supports parents and wants a youth foundation.
Step 1: Build to the guarantee, not the headline. We underwrite lifestyle on the $2.5M guaranteed (net of agent fees and multi‑state taxes) and set guardrails so incentives/endorsements are gravy—80% sweeps to long‑term capital.
Step 2: Jock‑tax & federal plan. We map duty days by state, implement quarterly estimates, and route charitable giving through a donor‑advised fund for deduction timing/privacy.
Step 3: Family support, sustainably. A formal policy funds parents monthly (capped), with any large asks routed through a “family board” for review—protecting relationships and the balance sheet.
Step 4: Risk management. Own‑occ disability; umbrella liability; cyber; entity separation for the foundation with proper D&O coverage.
Step 5: Investing, simply. A written Investment Policy Statement targets long‑term, after‑tax, real return with low‑cost global index funds; rebalanced annually. Private deals capped at 10% of net worth only after core liquidity is met.
Outcome after 4 years: Even without a second contract, the athlete exits with a fully funded 10–15‑year lifestyle reserve, a growing core portfolio, no high‑cost debt, and a foundation that can continue operating—optionality secured by early, disciplined choices.
The athlete’s financial checklist (use this before any contract, NIL deal, or advance)
Call your advisor first.
Confirm entity & banking rails are ready.
Run true‑net numbers: agent/attorney fees, multi‑state taxes, deliverables.
Stress‑test downside: injury, release, undrafted, claw backs.
Check insurance: disability/loss‑of‑value, liability, event/appearance.
Paper the process: counsel review; centralized record‑keeping (duty days, appearances, travel).
Decision rubric: If it’s not aligned with goals and guaranteed cash, pass.
Topics to prioritize with your advisor
How to get paid: payroll vs. 1099; endorsement routing; NIL invoicing.
Which financial institutions: athlete‑savvy private banking/treasury.
Budget & lifestyle: design to guaranteed income, not projections.
Family/friends support: formalize so generosity is sustainable.
Taxes: federal/state, jock tax, self‑employment for off‑field income.
Rent vs. own: flexibility during uncertain contracts often favors renting early.
Estate planning: will, POAs/health directives, privacy‑enhancing trusts.
Bill pay & oversight: dual‑control bill pay; quarterly vendor audits.
Risk management: umbrella, cyber, entity shielding for ventures/property.
Final word
If you remember nothing else, remember this: your first professional hire should be a fiduciary financial advisor, and every contract, NIL offer, appearance fee, acquisition, or advance should run through that lens. You get one earning window. Design your lifestyle, taxes, risk, and investments so one contract can fund a lifetime—then ratchet up only when new, guaranteed money hits the account. If you want a confidential set of eyes on your financial life my team at The Simpson Firm is here to help.
This article is for educational purposes and does not constitute legal, tax, or investment advice. Work with qualified professionals who understand athlete‑specific planning and your personal circumstances.
Written by Frank Simpson | Senior Private Wealth Advisor
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