As an athlete, one of the hardest things to do is to make money playing sports. Less than .05% of high school athletes will ever become professional athletes. Choosing a financial advisor for athletes should be easy but unfortunately, it is not. In this article, we will discuss how to choose a financial advisor for athletes. The things to consider, evaluate, and all-out avoid. The first step in evaluating a financial advisor is to understand what questions to ask. While a nice office, big boardrooms, and Fuji water are nice it does not move the needle for you in your career. What does move the needle is finding an advisor that has the necessary combination of competence, experience, and expertise. After all, you are in a situation that less than .05% of the population is in. What to consider, evaluate, and all-out avoid. 1. Who do you work with? Ask most financial advisors who they work with, and you will probably get a response like this: “We work with clients with over $1,000,000 in assets.” The problem with this is it only considers a small part of a client’s financial life. The amount of money someone has does not reflect the challenges that they face in their life. For athletes, managing money at a young age brings about hyper-specific challenges. It is one that few financial advisors have ever seen or dealt with. You want to ensure that your financial advisor works specifically with people like you. A more appropriate response to this question would be: “We serve as financial advisors for athletes, that is our specialty and what we do best.” Consider for a second if you were going in for an off-season procedure on an injury. Would you want a general doctor to be doing the surgery or would you want a specialist who only works on that particular injury? Choosing a financial advisor for an athlete should be viewed through the same lens. 2. What expertise should an athlete financial advisor have? As an athlete, you have a condensed earning window heightened by higher-than-normal earning power. This can be a great combination when executed properly. This formula executed incorrectly has led to the financial downfall of many athletes. The truth is the term “financial advisor” is one of the broadest in professional services. It takes very few qualifications to simply call yourself a financial advisor. This leads to many salesmen parading around as qualified experts. So how do you distinguish between an amateur and a professional? What qualifications does your team have that make you an expert? Real-World Experience: A financial advisor for athletes should be a combination of higher education and personal experiences. Remember, as a professional athlete you are in the less than .5% of the population that will make money playing your sport. For most financial advisors, it is a struggle to comprehend the rollercoaster that is professional sports. This includes the tactical strategies to benefit you as well as financial education. Advanced designations: The highest of these is the CFP, which stands for Certified Financial Planner. This is a combination of education, experience, and ethics. Every athlete should ensure their financial team incorporates a member with a CFP designation. 3. How will you help me build my team? Just like every athlete is a member of the team, your financial life should work the same way. A financial advisor for athletes should have the resources and network to help build the team of professionals. This team should be athlete-specific and world-class. The goal of having this team is to protect you from the unknown (insurance), reduce your lifetime tax bill (taxes), and help you plan for leaving a legacy (estate planning). Your team should consist of: Financial Advisor: Your point person for your family’s financial life. Accountant: The team member that will help you execute tax strategies specific to you that will lower your lifetime tax bill. Insurance Agent: As an athlete, you are an easy target. The goal is to protect what you have worked so hard to earn. Estate Planning Attorney: Athletes have an opportunity to create generational wealth for their families. The key is to build a plan to make that happen. This is the core four of your financial team. As an athlete, there are a lot of moving parts in your financial life, and it takes everyone on your team working together. 4. What areas do you cover? The days of a financial advisor simply helping you pick an investment portfolio is over (at least they should be). As an athlete, your advisor should be serving as the point person for your entire financial life. So, what does that entail? Cash Flow: As an athlete, you have direction around your routine, workouts, and preparation. Your finances need to have that same direction. As money is coming in you want to have a plan for spending, saving, and investing each dollar. Tax Planning: Taxes will be your single biggest expense as a professional athlete. Your financial advisor should be forward-looking to determine what tax strategies you can use to lower your lifetime tax liability. (There are a lot that are specific to professional athletes) Risk Management: Simply, how do you protect what you have worked so hard to earn? The most common forms of protection include proper home, auto, renters, and umbrella insurance policies. Estate Planning: Your financial advisor should coordinate and have core estate planning documents drawn up by an attorney. This provides direction for your assets and allows you to start building a legacy. Investments: As a professional athlete, you have the blessing of having a long runway to invest money. You want to ensure that your investments are diversified, tax efficient, and built to support your lifestyle. 5. Things to Avoid Conflicts of Interest – A financial advisor should be serving in a fiduciary copacity 100% of the time. Insurance First Firms – Many firms market as financial advisors but focus mainly on insurance products. Insurance has its place but it is insurance, not an investment. Shiny Object Syndrome – Your finances are personal; they should stay that way. Be aware of advisors parading around their client list. Soon they will be telling everyone they work with you. Layered Fee Structures – Financial advisor fees should be transparent. If you can’t understand how they are getting paid ask. Many financial firms have layered fees on top of what they market, meaning more fees for the end client. Choosing the right financial advisor for you is a combination between fit, feel, and firepower. A financial advisor for athletes needs to have competence, experience, and expertise in understanding your unique situation as an athlete. Remember, you are in the .05%, is your financial advisor? Get in Touch With An Advisor *The tax and estate planning information offered by Moment Private Wealth is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

A Donor Advised Fund (DAF) is a great tool to consider for those with extraordinary income. Today we will break down what a Donor Advised Fund is, who should consider a Donor Advised Fund, and what tax benefits you will receive. What is a Donor Advised Fund? You may have heard this term before, but wondered what it is. It is an investment account used for giving. When funding this type of investment account, you get special tax treatment on your assets today and in the future. You can fund a Donor Advised Fund with cash or investments. You will be able to shift assets from your personal name into your charitable bucket when funding a Donor Advised Fund. When you move your assets into a Donor Advised Fund, the IRS treats these assets as if you have given them away in that calendar year. Donor Advised Fund assets must be given to a qualified 501C(3). A 501C(3) is a code the IRS uses to designate an organization as a charity. You cannot pull these assets back and use them for your benefit. The benefit is that the IRS allows you to get special tax treatment on the assets you donate, the growth of your assets in the Donor Advised Fund, and a tax deduction today. Example: Bill decides to move $1,000,000 into his DAF from his brokerage account. Bill does this because he wants to get multiple tax benefits in the calendar year that he is funding his DAF. Once Bill moves his assets to the DAF, the assets no longer belong to him personally but to his DAF. Bill can give these assets to any qualified 501C(3). Bill is utilizing this because of the special tax treatment this account allows and to have control over his giving in case he wants to adjust the charities he supports in the future. Recap – What is a DAF fund? An investment account that you can utilize for giving. A way to get special tax treatment on your assets today. A way to get special tax treatment on your assets in the future. Who should consider using a Donor Advised Fund? The two common characteristics of people utilizing a DAF are those experiencing extraordinary income or looking to diversify out of a concentrated holding.. The key to determining the use of a DAF is timing. Example 1: Bill has Apple stock that he bought back on December 1st, 1991, for .60 cents per share. Bill has held his Apple stock until today when the stock is worth 151.60 cents. One of the primary reasons that Bill doesn’t want to sell his Apple stock is because he will incur capital gains taxes on his sale. These taxes are calculated by looking at the difference between what Bill paid for the stock and what it is worth today. In this example, he will pay 151 dollars in capital gains taxes per share. Bill has decided that he no longer wants to hold his Apple stock and is trying to figure out how to minimize his capital gains taxes. If Bill moves his Apple stock from his brokerage account into a DAF, he will pay zero dollars in taxes on his Apple stock. Yes, you heard that right, no tax liability. Example 2: Bob is a professional athlete and has one year remaining on his contract. He recognizes that this might be his last contract and may retire after this year. He wants to know if there is a way to reduce his tax liability in the last year of his contract. By donating cash or appreciated securities to a DAF, Bob can get a dollar-for-dollar deduction on his tax return. Doing this in the last year of Bob’s career may make sense because he will be in the 37% tax bracket. If he retires, his tax rate may be reduced significantly. Let’s assume his tax bracket post-playing career is the 12% tax bracket. In this example, the benefit of using a DAF today versus after his playing career is a 308% increase in value. When you are in the highest tax bracket you get the most bang for your buck. Recap – Who should consider a Donor Advised Fund? If you are trying to diversify assets on your balance sheet and get special tax treatment. If you are experiencing a year or period of extraordinary income and are looking to reduce taxes. What are the Tax Benefits of a Donor Advised Fund? When considering a donor-advised fund there are 3 primary tax benefits. The first benefit is that you get an immediate tax deduction on your taxes. The IRS will treat any contribution as a charitable contribution for tax purposes. The second benefit is that you can mitigate capital gains taxes on assets you contribute to a DAF to zero. In the example outlined, you can see that any appreciated asset you contribute will avoid capital gains tax. The last benefit is that the assets in your DAF can be invested and grow tax-free. Example: Joe is in the process of selling his company while mitigating his taxes and preserving his legacy. Joe is going to sell his company for $20,000,000 this year with the deal projected to close in August. This strategy will need to be implemented in the calendar year that the transaction happens. In a review of Joe’s balance sheet, he has several positions in his investment portfolio that have appreciated. Joe has the opportunity to gift shares of these appreciated securities to a DAF. When Joe does this, he will eliminate the capital gains taxes on these positions at the time of the gift. When the assets hit his DAF, he will receive a tax deduction of that amount. Remember, Joe now controls these funds and can give them away to any qualified 501c(3) over any period. Lastly, he may now invest these funds and they will grow tax-free. This is appealing to Joe, as he wants to create a legacy of giving over the course of his life. Tax Benefits Recap: You can receive an immediate tax deduction on your tax return. You can mitigate capital gains taxes to zero. The assets in your Donor Advised Fund will grow tax-free If you are a pro athlete or entrepreneur who is interested in learning more about how a Donor Advised Fund might fit into your financial plan, schedule a call and talk with a Moment founder. Get in Touch With An Advisor *Moment Private Wealth offers information on tax and estate planning that is general in nature. Tax and Legal advice are not provided by Moment Private Wealth. Consult an attorney or tax professional regarding your specific legal or tax situation.