Erik Averill
- Former professional baseball player Erik Averill now helps manage $150 million for current athletes, and he says a lot of people wrongly believe his clients are irresponsible and bad with money.
- He says most athletes are trying to make sound decisions with money, but like many other people, they lack familiarity with the subject. Their careers are also extremely unpredictable and can end at any time.
- Averill is one of the co-founders of Athlete Wealth Management, which also staffs his brother Brandon. Both played minor league baseball in the early 2000s before starting their careers in finance.
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The lives of professional athletes are dramatically different in many ways from the fans who follow their every move. But when it comes to needing financial and retirement help, they have a surprising amount in common with the general public.
That’s how Erik Averill explains the situation. A former minor league baseball player, he’s one of the cofounders of Athlete Wealth Management, which handles $150 million for 125 active professional athletes and also provides financial services like tax advice, estate planning, and insurance.
He told Business Insider that his clients are trying make important decisions about their futures while they’re pressed for time. And many of them are making those calls without as much background knowledge as they might like.
"A lot of the media has painted the athlete as this unintelligent, immature person who nobody can help and they’re out blowing their money," he said. "The athlete really is at the mercy, so much like the general population is, of trusting someone else with the expertise."
He’s come to that conclusion based on his own career. Averill, a left-handed pitcher, was drafted out of college by the Detroit Tigers and pitched in their organization for two years before an injury. While out for the 2007 season following an injury and Tommy John surgery, and he took an internship at Smith Barney, now a part of Morgan Stanley.
"I got to see kind of from afar the pain point that finances can be for people in general," he said. "I knew I wanted to be a part of that solution, and so when my career was over, I knew that was something I wanted to do."
He pitched one more season for the Seattle Mariners organization before his release. That’s how the end usually comes for pro athletes at any level because of injury, age, or competition.
"There are very few Kobe Bryants or Derek Jeters who get the farewell tour," he said. "Most of our clients are being fired, to put it bluntly."
The moment their careers end, they’re in a whole new ballgame. And unlike Averill, they may not know what they want to do next. That can leave them in unknown territory, dealing with financial pressures and family obligations as they start new careers later in life than many non-athletes do.
"It’s not just (that) their playing careers are uncertain," he said. "What they are going to do after their playing career is even more uncertain."
All of that means Averill has to treat his clients as a mix of a young person and a near-retiree. So he evaluates his clients’ spending and has each one build up a base of capital as quickly as they’re able. He keeps their portfolios entirely liquid until they get to that point and uses ETFs and low-cost mutual funds for broad market exposure.
"We believe that it is nearly impossible to beat the market by individual stock picking or market timing," he said.
Averill adds that for most clients, he’ll invest at least 20% of their money in bonds, and in the early stages he limits their exposure to alternative investments like venture capital and private real estate to 10% or less. He says those options can be riskier than they look, and can come stuffed with high fees.
That leaves a lot of room left for stock exposure, which is how he balances that careful stance with the youth of many of his clients. With those strategies, he says his clients can fight back against challenges that can leave them in bad financial shape after retirement — or even broke.
"The truth is the most qualified advisers either aren’t getting access to the athletes, or the athletes aren’t getting access to the most qualified adviser," Averill said. "Most athletes are choosing their financial advisers not based off of who’s most qualified but who does their sports agent recommend, or who’s hanging around or works with some of their teammates."
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Source: Business Insider – mjay@businessinsider.com (Marley Jay)