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Lots of Money Will Not Make You Smart
By JLP | July 1, 2006
Why is it that so many “rich” people feel like they are too good for traditional investments? Take for instance this story I just read over on the CBS Sportline website about the NFL players that were scammed by a supposed hedge fund manager by the name of Kirk Wright. I blogged about this back in March when it first was discovered that Wright was scamming people. It’s obvious from the Sportsline article that these football players were investing WAY MORE than they should have with this one guy, otherwise they wouldn’t be worried about having enough to retire on. Where’s the diversification fellas?
This kind of stuff must happen all the time. I can just imagine the sales pitch:
“Mr. Rich Football Player, you are TOO RICH to invest the same way everyone else does. You need a SPECIAL program taylor-made for you and other rich people like yourself.”
Yes, wealthier people need solid tax advice and have other special issues. However, you can’t trust just anybody who comes along. Also, they should not invest most of their money with an UNREGULATED hedge fund! You do that and you’re just asking for trouble.
Topics: Miscellaneous | 6 Comments »
July 3rd, 2006 at 8:13 am
NFL players want to feel special like everyone else. And most of them did not come from money so they don’t have a good idea of how wealthy people do manage their money.
July 3rd, 2006 at 3:32 pm
They need professional wealth management even more than most richer people. Unlike most rich people, who built their fortunes over time and with close attention to their business and financial strategies, pro athletes are suddenly showered with wealth at a young age without any training or experience in how to deal with it. It is little wonder that lots of the wealth goes for parties, friends, and scams.
Good agents offer wealth management services that specialize in athletes and their issues, and most athletes do take advantage of it nowadays.
A friend of mine who worked in the SF Giants front office said that baseball players tend to do better than most; his theory was that baseball players spend their early years in the minors and are somewhat older than most football and basketball players when they get their taste of big bux.
July 3rd, 2006 at 7:26 pm
There’s another reason that pro athletes do have a special situation. Their working careers are shorter than most professions. They start earning young, but they can’t continue to compete until they qualify for Social Security.
July 4th, 2006 at 10:15 am
This reminds me of the book “The Millionaire Next Door” where the authors discuss high income, high consumption individuals. They make lots of money, but spend it just as fast. They are the people that your average person thinks of when they think of rich persons – lavish consumption, ostentatious displays of material goods.
The authors contrast that type of person with the person who has greater wealth, accumulated by work or investment, and who has a modest lifestyle. Most of their neighbors don’t even know that these people are millionaires by their lifestyle.
I hope that these athletes can find some competent financial advice that lets them channel their short-term high incomes into long term financial security.
July 5th, 2006 at 9:20 am
Well, the players are claiming that the hedge fund was endorsed by the NFLPA; if that’s true, this bears a striking similarity to the story about the teachers union scams (just substitute ‘hedge fund’ for ‘mutual fund’). I think the sales pitch was probably more about their shorter work/retirement ratios and much larger expected medical expenses than about how much money they were making. The thing to remember about this story is that the reason they got scammed is because they were trying to be responsible with their money, and not because they blew it on needless junk.
On the other side of the equation, here’s a sad story on an earlier generation of NFL retirees. A lot of these guys retired barely able to walk.
July 7th, 2006 at 5:21 am
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