Financial Advisors and Business Managers: Who to Trust and the Red Flags

The people who handle your money after the contract is signed will have more effect on your life than the people who negotiated it. Most advisors are honest. But athletes are targeted because the checks are big, the careers are short, and the players are young and busy. You do not need to become an expert. You need to know which questions to ask and where to check the answers.

Fiduciary versus broker: the most important question

• A fiduciary is legally required to put your interests first and disclose conflicts. Registered investment advisers are fiduciaries under federal law. Certified Financial Planner (CFP) professionals must act as fiduciaries when giving financial advice.
• A broker (registered representative) must follow a 'best interest' rule when recommending investments to you, but is often paid by commissions on what they sell. That creates a pull toward products that pay them more.
• Many professionals are both, wearing different hats at different times. Ask directly: 'Will you act as a fiduciary for all of my accounts, all the time, and put that in writing?'

What the fees look like

• Assets under management (AUM): commonly around 1% a year of what they manage, often lower on larger accounts.
• Flat or hourly fee: a set price for a plan or ongoing advice. This can be far cheaper for large portfolios.
• Commissions: paid by the product company when you buy insurance, annuities, or certain funds.
• Business managers: handle bill-paying, budgets, taxes coordination, and household staff. A percentage of income, with 3% to 5% commonly quoted, is typical in sports and entertainment. Some work on a flat monthly retainer.

Check anyone in five minutes, for free

1. 1
   FINRA BrokerCheck (brokercheck.finra.org)

   Search the person and their firm. You will see licenses, employment history, customer complaints, and any regulatory actions. A long list of firms in a few years, or repeated complaints, is worth asking about.

2. 2
   SEC Investment Adviser Public Disclosure (adviserinfo.sec.gov)

   Search the adviser and download the firm's Form ADV Part 2A brochure. It must explain fees, conflicts of interest, and disciplinary history in writing.

3. 3
   Your players association

   The NFLPA runs a Financial Advisor Registration Program. Registered advisors must have a CFP or CFA designation, at least eight years of licensed experience, liability insurance, and pass a background check. Registration is a screen, not a guarantee, so still do your own checks. Ask your union what resources it offers if you are in another league.

4. 4
   CFP Board (cfp.net)

   Confirm that anyone calling themselves a CFP professional actually holds the certification and see any public discipline.

5. 5
   Search the news

   Search the person's name with words like 'lawsuit,' 'SEC,' or 'fraud.' It takes a minute.

Red flags that should stop you cold

• Guaranteed high returns or 'no risk.' Real investments do not guarantee big returns.
• Private deals that only insiders can get into: restaurants, casinos, real estate projects, startups, film financing. These are hard to value and hard to get out of.
• They want control. Anyone who asks for power of attorney over your accounts, or wants your money held somewhere other than a large independent custodian, is a problem.
• Statements come from them, not the custodian. You should get statements and online access directly from the custodian (for example, a major brokerage), not a report the advisor made.
• Pressure and secrecy. 'Sign today.' 'Don't tell your family.' 'Your CPA won't understand this.'
• Undisclosed conflicts. They own part of the business they want you to invest in, or get paid by it.
• One person does everything. The same person picks investments, pays bills, and does taxes. Split these roles so each one checks the others.

Real cases that show what can go wrong

Ash Narayan, a former Southern California financial advisor, was sentenced to 37 months in federal prison and ordered to pay $18.8 million in restitution after prosecutors said he took more than $30 million from pro athlete clients, including Jake Peavy, Mark Sanchez, and Roy Oswalt. He steered clients into a company where he sat on the board without telling them, and at times had staff forge client signatures on wire authorizations.

Jeffrey Rubin, who ran Florida-based Pro Sports Financial, was permanently barred by FINRA after steering 31 NFL players into high-risk investments tied to an Alabama casino project, which went bankrupt. Players lost around $40 million. FINRA found he received a 4% ownership stake in the project and $500,000 from its promoter, an undisclosed conflict with his own clients. He was also a registered advisor with the NFLPA at one point before the union revoked his registration.

A simple setup that protects you

• Your money sits at a large independent custodian in accounts in your name.
• Your advisor can place trades but cannot move money out to anyone but you.
• Your CPA is hired by you, not by the advisor, and reviews what the advisor does.
• Wires out need your personal approval, by phone, with a code word.
• You meet with the team at least twice a year and get a one-page summary: what you own, what you paid in fees, and how it did.
• Use /calculator to see your real take-home so any plan starts from the right number.