Going for broke: Many pro athletes still struggling with finances

Short-time Diamondbacks manager Wally Backman declared bankruptcy despite a career in Major League Baseball. He did it, he said, to avoid paying over 20 creditors. (Photo courtesy Major League Baseball)

PHOENIX — Mike Tyson. Allen Iverson. Diego Maradona. Terrell Owens. Four major athletes, four major sports.

And an estimated $600 million of earnings lost.

Eight years after an eye-opening Sports Illustrated study suggested 60 percent of NBA players go broke within five years of retiring from the game, concerns remain about professional athletes’ finances as another NBA season nears. A new study by the National Bureau of Economic Research reports that nearly 16 percent of NFL players drafted between 1996 and 2003 declared bankruptcy within 12 years of retirement.

“My Mom is an educated woman, went to law school,” Suns forward Jared Dudley said. “So, I was lucky. A lot of players didn’t have that.”

Athletes in financial distress can be found in all leagues and all cities, including those with Arizona connections.

Former Diamondbacks pitcher Livian Hernandez filed for bankruptcy in July after making $53 million in 17 seasons. Pro golfer Billy Mayfair lost many of the millions he made following a difficult divorce and custody battle. Short-time Diamondbacks manager Wally Backman, after an accomplished playing career, was sentenced in 2012 on charges of bankruptcy fraud, concealment of assets and money laundering. Boxing’s Tyson, basketball’s Iverson, soccer’s Maradona and football’s Owens all lost fortunes.

How does it happen? Those close to the situation suggest a variety of reasons, from lack of financial education to unscrupulous advisers to not taking advantage of resources.

“I would say, on the two (NFL) teams I was on in those three years, probably 30 meetings or so, there was maybe four to five guys on the entire team that would show up,” former Arizona State and NFL quarterback Rudy Carpenter said about financial meetings the league offered.

Carpenter also pointed to the NFL’s 401k program that allows large contributions that the league will match.

Many players don’t take advantage of this, Carpenter said, because of a lack of trust and education. Many aren’t educated early enough about the financial world, and it causes distrust with the “system.”

Carlos Dias Jr., a wealth manager for MVP Wealth Management Group in the Orlando, Florida area, who works with a variety of professional athletes, believes mismanagement is a problem and that many athletes work with the same wealth manager/financial advisor their whole career.

“They don’t know how they’re invested. They don’t know what they’re doing. They don’t know if they’re being overcharged on fees. They have no clue,” Dias said. “They just have somebody that’s ‘their guy.”

Many accountants exist that also call themselves “business managers,” Dias said. In the last year alone, he has seen at least two big-name “business managers” that celebrities and athletes have sued.

“There’s a lot of mismanagement in this business,” Dias said.

What people read about an athlete’s salary isn’t what the player is taking home. Many don’t realize that Giancarlo Stanton will receive about half of his $325 million mega-deal.

It’s not only taxes but money to agents, financial advisers etc. … that cut into paychecks.

Another thing former players say is hurting athletes’ financial health is marriages that end.

“Early in my career, I heard a league official say that once they retire, there is an 87 percent divorce rate among NBA players,” former NBA player Adonal Foyle wrote in “Winning the Money Game: Lessons Learned From the Financial Fouls of Pro Athletes.” “Although I haven’t verified this number, based on what I’ve witnessed, it seems about right.”

Dudley believes that “the number one thing for going broke is obviously divorce. Off the rip, you lose half your money to that. The second thing is kids. Especially out of wedlock, you have two or three kids to different women; you’re paying all that child support. So, I think guys are smarter when it comes to that than they were 10 years ago.”

He also believes athletes are starting to make “wiser choices. Fewer cars, less jewelry, buying smart homes. I don’t think guys are going for the hotel and restaurant things. They’re smarter than that, and I think the NBA now puts money into your account to help you get to your 401k and pension.”

Carpenter agrees that divorce has cost players.

“All of a sudden, you’ve got 15 million in your bank account and five million in debt and you’re feeling pretty good about yourself. Now, your 15 million dollars dips to seven and a half million dollars. And then you’re being asked to pay child support, spousal support, alimony, and now your seven and a half million dollars just went to zero. And you still have five million in debt.”

This leaves many athletes asking “What can I do to protect myself?”

One idea is to receive a “financial education,” but as Dias explains, sometimes large brokerage firms will come to universities and educate players on how they plan on selling them once they make it.

“Financial education is a great piece, but it really depends on how you’re getting that financial education and who’s teaching it to you,” Dias said.

Even though many of these athletes are smart, Dias said, some accountants are taking advantage of them and draining their assets with phony tax credits and deductions.

“They get surprised in maybe a few different ways,” Dias said. “One of the ways is that they’ve been falsely told their investments are doing really well when maybe they’re not. When it comes time that they might need some money from those investments, that’s where a lot of these problems arise, and they find out that these investments were maybe some scam or scheme.”

Responsible athletes exist, too. Ryan Broyles, a star wideout at Oklahoma from 2008-2012 who spent three years with the Detroit Lions, took matters into his own hands after making approximately $3.6 million in the NFL.

“Ryan Broyles had this great philosophy,” Dias said. “He was earning $600,000. He was living off of 10 percent of his salary. That is a good benchmark to live off of. He’s been saving the rest.”

“Any money that I have, or that I can make, I try to think, first, how can I invest this,” Broyles said.

Why don’t other athletes think this same way? Broyles believes they do. In fact, he thinks 90 percent of athletes feel that way. Just many still lose their money,

“It’s all psychological,” Broyles said. “You have to understand that this is the NFL, which means Not For Long. You have to look past today. It’s all about conquering yourself.

“You’ve got to pick up books. You’ve got to talk to people. You’ve got to educate yourself. You’ve got to WANT to do it.”

Athletes can be their own worst enemies.

“100 percent,” Broyles said.

Broyles is married, with a 2-year-old son. Having these responsibilities puts life in a different perspective. He is a real estate investor and also does broadcast work for Oklahoma.

Athletes don’t take economic classes to learn how to invest because “it’s taboo,” he said. “It’s taboo for people to talk about money. It’s just not taught. It’s not in the school system and depending on your demographic; you’re not getting it at home.”

Broyles said if he wasn’t married with a kid, he probably wouldn’t have a buffer financially.

He lives in Norman, Oklahoma, and “doesn’t need much.” His house is paid off. He has a car payment

“Could we spend more? Of course,” Broyles said. “It’s just not worth it.”

Broyles has had people come to him for financial advice over the years, including his teammates and players he has never met.

“Articles went crazy on the Internet (about my savings),” Broyles said.

Broyles preaches finding a financial adviser with whom you can communicate well and not just an X’s and O’s guy.

“Some people buy into the glamour and high returns and some people buy into the relationship,” Broyles said.

The professional leagues are increasing their education and assistance they are providing players, even if players aren’t always taking advantage of it.

“There were major players, and the answers I would get from them are ‘You don’t understand where I came from. I have no idea how long I’m going to live,’ ” Carpenter said. “I’m going to spend all my money before it’s gone.”

Who the leagues choose to work with is important, Dias said.

“These leagues are as good as whom they team up with,” he said.

Dias, who is writing a book, wants athletes to learn about the dirty secrets of the financial industry that they won’t hear from their typical advisers.

“There’s a lot of things that haven’t been taught in the players seminars that I’d like to teach the players,” Dias said. “So they know what to ask and how to better arm themselves with the particular knowledge.”

Dudley was animated on Twitter recently, declaring that financial classes offered by many universities didn’t do enough, that their classes didn’t adequately help athletes understand how to manage their money.

“I think it’s tough,” Dudley said. “Guys are going one-and-done. It’s a small knowledge. … That’s why the (NBA Players Association) comes in and tries to help. Every year, ‘You’ve got to take these classes.’ I think the more you’ll see it the more those numbers will go down.”

Most agree athletes need to to take matters into their own hands.

“I just assumed that my agent and financial adviser would take care of me and have my best interest in mind,” Terrell Owens told Forbes.com. “That’s where I was wrong.”