Sweven Wealth
- Former basketball star Troy Murphy transitioned from a 12-year NBA career to one advising the newly wealthy. He has pointers for both the nouveau riche and those aiming for that status.
- Murphy was shaped by the uncertainty he faced when he needed financial advice during his playing career, and spent years learning from finance experts before founding his firm, Sweven Wealth.
- The former Golden State Warrior and Indiana Pacer stresses that anyone who wants to build wealth or manage it needs to diversify, be able to pause when their circumstances change, and be committed to constantly learning more about managing their money.
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Troy Murphy‘s second career isn’t built around his successes in 12 years an NBA player. Instead, it calls back to the very first moment of that life: the day he became wealthy, at the age of 21, with the stroke of a pen.
Murphy, a 6’11" forward and a skilled three-point marksman out of Notre Dame, signed a four-year deal that paid him more than $1 million per year after he was drafted by Golden State. Ultimately he made about $66 million before taxes in the NBA, spending most of his career with the Warriors and the Indiana Pacers.
Along with the excitement you might expect, from his first days as a professional, his new status brought a lot of uncertainty.
"I didn’t know how to navigate this new financial situation I was in," he told Business Insider in a phone interview. "I didn’t know who I should be trusting."
That feeling helped lead him to found Sweven Wealth following his playing career. The business that advises just not athletes, but anyone who gets rich — or as Murphy calls it, has a "sudden wealth event" — because of a company IPO, an inheritance, or other means that quickly change their circumstances.
Reuters / Henry Romero
Murphy is committed to financial education to the point that his firm donates its profits to programs that support financial literacy. The two-time All-American college star has a three-point play of advice based on his experiences.
Build an All-Star team
Sudden wealth might be in your future or it might remain a dream, but Murphy says anyone can start with a few basic principles that will lead to better investment and financial outcomes.
"You don’t want to overspend for a product, you want to be diversified, and you want something that’s tax efficient," he said.
Like a growing number of people in finance, Murphy is skeptical in general of actively-managed funds, saying that as a player he often felt he was taking all the risk while managers took a big chunk of the profits of his investments.
He talks up basic, low-cost index funds like those offered by Vanguard. The dividends of such funds are often tax deductible, and the index fund can help an average investor diversify. That’s often difficult, as a lot of people have big portions of their wealth tied up in their homes, or an employee of a newly-public firm like Uber might attribute most of their wealth to their stock options.
Call a time-out
If your circumstances change, or if you decide you aren’t sure you have enough of a financial path laid out for yourself, don’t make any big changes right away. Keeping emotions out of the process is important.
Murphy notes that a lot of people have daydreamed about what they would do if they became wealthy, and given the chance, they start implementing those plans right away. That can rob them of opportunities and create new financial obligations that become difficult to meet.
"People are all too eager to spend the money when they should really take the time to adjust to this new emotional status, this new financial landscape, and then figure out what the purpose is they have for the money and put together a plan that’s sustainable," he said.
Become the head coach
Despite his support of passive investments, Murphy stresses that people shouldn’t put their finances on autopilot and forget about them. As an adviser, he encourages people to get outside expertise — but emphasizes that it’s not enough.
"If someone comes to me and says "I want you to help me with my portfolio," and they just want you to do it, that’s not something that I think is good," he said. "No one’s going to care about your money as much as you do."
As he adjusted to life in the NBA and the big contracts that come with it, Murphy saw first hand that players who turned their finances over to someone else sometimes got burned badly.
"I desperately did not want that to happen to me," he said.
That motivated him to consult with a wide variety of professionals during his career, learning about different strategies and ultimately gaining certainty that he could manage money for himself — and then others.
He added: "After you get those initial lessons put into your head, you have to really want to learn and you have to be a sponge with all this stuff."
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Source: Business Insider – mjay@businessinsider.com (Marley Jay)