NHLers spend most of their youth climbing the ranks, making sacrifices and pushing themselves to the limit just for a shot at the big time. When they finally get there, the reward is the opportunity to play in the best league on the planet – and to get paid handsomely for it. But holding onto that money isn’t always easy, which is where professionals such as Roman Fradkin come in.
A wealth advisor with RBC Dominion Securities in Winnipeg, Fradkin works with around 20 NHLers, including Jonathan Bernier, Dale Weise and Alexander Burmistrov. His mission is to make players see the light when it comes to saving and investing the right way, because a pro athletes’ earning window may be lucrative, but it’s also small. “You’ve got six or seven years to make 50 years worth of money,” Fradkin said.
According to numbers that Fradkin has seen, the average NHL career is about 5.4 years, while the average total earnings are around $12 million. And while multimillion-dollar contracts sound big (and to the non-athlete, they are), matters such as taxes, escrow, agent fees and insurance all eat away at the pie.
And if a player isn’t careful, that nut can get stolen away very quickly. Because of this, Fradkin has composed a list of Do’s and Don’ts for players he works with. Here are some highlights:
1. Avoid investing in a high risk startup business
“It’s always a hot bar or restaurant,” Fradkin said. “But buying into a nightclub in Phoenix when you play for say, the Ottawa Senators, doesn’t make sense.”
2. If something sounds too good to be true, it probably is
“The cash flow is so great that we don’t have to do anything they don’t understand,” Fradkin said. “Stick with things that are conservative.”
3. Avoid spending a lot of money on depreciating assets such as exotic sports cars
Sure, they look fun, but the price tag is actually worse than it seems. For example, a car may cost $200,000, but with all the escrow and income tax (often 50 percent or more depending on where a player lives) coming off your salary, it’s really like a $400,000 purchase. “Guys really turn their heads when I tell them that,” Fradkin said.
4. Insure your primary asset – your body
Disability insurance is a big one for Fradkin. There are two kinds: off-ice coverage and 24-hour coverage. Off-ice is substantially cheaper, since it only covers accidents away from the rink, but Fradkin believes 24-hour insurance – which also covers on-ice injuries – is better for younger players since they haven’t amassed a lot of earnings yet and don’t have a nest egg built up.
5. Maintain a disciplined cash flow plan
This one doesn’t have to be on the player alone. When Fradkin hooks up with a new client, one of his first priorities is to get the parents on the phone. That way, the player has multiple voices to hear from that he will trust. Cases like that of Jack Johnson, who went bankrupt, are rare, and Fradkin sees his job as being a facilitator for the parents and players. “They’re ultimately the brain trust,” he said. “They’re the CEO. I’m just trying to break down complex concepts for them.”
6. Build a well-diversified and balanced portfolio
After expenses, a player may have 30-35 percent of his gross earnings left. That’s when it’s time for the “buckets.” Fradkin encourages his clients to establish a long-term savings portfolio, but also to keep some cash in an account and perhaps even make short-term investments. The overall goal is to keep the player’s mind on the ice. “The demands and time constraints are so great,” he said. “We encourage guys to have enough cash on hand so that money is not a concern and doesn’t distract from hockey.”
7. Have an estate plan
With travel and training, NHLers are a higher risk for an unforeseen tragedy. Make sure you have an up-to-date plan to help reduce any tax burden on your heirs.