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This article originally appeared on Conseiller.ca.

Advisors play a key role in protecting athletes from financial body checks.

When Jack Johnson, a 28-year-old defenceman currently with the Columbus Blue Jackets, signed a seven-year contract worth US$30.5 million with the Los Angeles Kings in 2011, his financial future seemed secure. Yet, reports The Columbus Dispatch, he now finds himself penniless. How did that happen?

In 2008, Johnson decided to fire his agent, Pat Brisson. Brisson is no newcomer, however: among the most influential agents in the NHL, he represents greats such as Jonathan Toews, Sidney Crosby, and Max Pacioretty. Even so, Johnson still opted to entrust the management of his finances to his parents, to whom he granted power of attorney.

When Johnson declared bankruptcy in 2014, he was buckling under the weight of debts valued at approximately US$15 million, while his assets totalled less than US$50,000. The debt allegedly arose from a series of risky, high-interest loans (as much as 24%) that his parents took out without his knowledge to purchase items such as cars and a luxurious residence in California. They pledged their son’s future earnings as collateral, and failed to repay many of their creditors. Johnson has cut off all contact with his parents, but will be reeling from their bad management for years to come.

Hockey analyst Dany Dubé says the Jack Johnson case is fortunately an exception. However, it demonstrates how important it is to entrust one’s finances to a professional who can bring an objective approach.

“The strong emotional ties we have with our family and friends can cloud our judgment,” notes the analyst. “Even when everyone has the best intentions, it’s a slippery slope. Players can leave their emotions out of the equation by entering into a true business relationship with a professional. If they’re not satisfied, they can always look elsewhere.”

Read: A look at NHL players’ tax troubles

This applies even in the case of friends or family who are financial services advisors. Just ask former Montreal Canadien forward Joé Juneau. Juneau invested his assets with his old friend Phil Kenner, who worked as an advisor. The two had met while playing hockey together at an American university in the late 1980s, and Kenner was the best man at Juneau’s wedding.

But in July, a Long Island court convicted Phil Kenner on six counts of fraud, conspiracy, and money laundering for having bilked a total of US$30 million from Juneau and several other NHL players. Kenner and his accomplice Tommy Constantine, who was convicted at the same trial, allegedly spent the money on private jets, luxury homes, collateral on risky loans, and a tequila company, reports the NY Daily News. Constantine even used the players’ money to pay a mergers and acquisitions attorney who helped him attempt to buy Playboy Enterprises.

IN GREAT DEMAND

When you’re known and admired, everyone wants a piece of you. “People want to be associated with NHL players,” says Dubé. “They’re constantly bombarded with proposals of all kinds, from attending events to investing in projects. But not all of the proposals are good. Far from it! They might be honourable, but they aren’t necessarily financially sound.”

Player agent Philippe Lecavalier has seen this type of situation before. MFIVE Sports, the agency he works for, represents a number of NHL stars, including his brother Vincent and Quebec players Patrice Bergeron and Kris Letang. “I simply tell my players that they don’t even have to respond to these offers. All they need to do is send them to me,” he explains. “If the project looks good, we can discuss it. I ask anyone proposing investments to my players to send me a business plan; 99% of the time I don’t receive anything and I never hear from them again.”

A wealth manager with a major Canadian bank who specializes in this type of clientele reveals that these “non-professional” offers are his biggest competition (the manager prefers to remain anonymous). Like Lecavalier, he asks players to forward such proposals to him. “Sometimes there are surprises. A player might come to my office and announce that he just bought a multiplex. I tell him what I think, but it’s his own money, after all.”

Read: P.K. Subban makes $10M donation to Montreal kids’ hospital

ROOKIES IN PRE-RETIREMENT MODE

So, let’s talk about that money. From the outside looking in, one can imagine that all NHL players are rolling in dough and will be sitting pretty for the rest of their lives, but the truth is, their careers are extremely brief and they have zero job security. According to the professionals who manage their finances, prudence is the name of the game.

François Giguère is a household name among hockey fans in Quebec. The chartered accountant worked for the Quebec Nordiques from 1990 to 1995, first as a controller and then as assistant to the general manager. He followed the team when it moved to Colorado, before quitting in 2002 to become assistant general manager of the Dallas Stars. In 2006, he returned to Colorado as executive vice-president and general manager of the Avalanche, a position he held until 2009.

He knows hockey, collective agreements, and player finances—so he started a new career as wealth manager for A&I Financial Services in 2014. “I wanted to stay connected with my beloved hockey, especially since I know it so well,” says Giguère. “Throughout my career, I have noticed that transitioning into retirement was rough for many players, especially in terms of finances. With no more agents, less guidance, and a reduced income, they can really use the help of a wealth manager or financial planner.”

Retirement can come at any time for a hockey player. An average career lasts five and a half years, according to athlete finance specialists RAM Financial Group. Quanthockey.com puts that median at only four years. And about 200 of the 683 players listed on spotrac.com make less than US$1 million.

Read: Is the hockey dream worth the investment?

PROTECTING CAPITAL

“I manage these players’ money like I would for a pre-retiree, rather than an employee in accumulation phase,” says Giguère. One of his primary concerns is making sure players have access to cash when they need it. Since they only get paid during the regular hockey season, the first paycheque comes in on October 15, and the last on April 15. But bills need to be paid year round. What’s more, a player can suddenly find himself without a contract and forced to retire. He’ll need to finance this transition period before starting his new career, which may be less lucrative.

“The money a player makes at the start of his career needs to be protected with safe and liquid investments,” says Giguère. “After that, we can talk about putting some aside for the post-hockey transition. Only then is it time to adopt a more long-term vision and make more risky investments with higher potential returns.”

He pointed out that many players start out in the American Hockey League, where salaries are more in the area of $100,000, and some never make it to the NHL. “These men have a perfect opportunity to put some money aside when they’re still young, so they can support themselves during a professional transition. They can even go back to school.”

Read: Advising clients with short careers

Our anonymous wealth manager also exercises great caution. “I only work with what’s on the table right now,” he says. “You can never tell if a player is going to have a lengthy career, so there’s no point planning for money that might never materialize. As a rule, players have very little bargaining power when they sign their first two contracts. Rookie salaries are capped under the collective agreement, and at the signing of the second contract, the team holds the rights over the player. So he doesn’t have much leverage. As of his third contract, he starts getting more money, and we can consider more aggressive investments. But before that, security takes precedence over returns.”

“Besides, a player’s chance to make more money comes on the ice. If he plays well, he can accumulate millions of dollars. That’s where he needs to put his energy, not on risky investments.”

Originally published on Advisor.ca

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