The real managers in billion-dollar sports

There’s a lot of money to be made in sport, never more clearly evidenced than last weekend’s fight between Manny Pacquiao and Floyd Mayweather, which has been called the richest in boxing history.

Thirty-eight-year-old Mayweather, an undefeated five-weight world champion, could take home as much as US$180 million in revenues from Saturday’s fight, including pay-per-view subscriptions, arena tickets, sponsorship, merchandise and broadcast sales.

Thirty-six-year-old Filipino fighter Pacquiao, a six-time welter weight world champion, pocketed around US$120 million, swelling his net worth by around a third to around US$300 million, according to Wealth-X.

Mayweather and Pacquiao battling in the boxing ring on 2nd May at the MGM Grand in Las Vegas. (Getty Images)

Meanwhile in football, the richest football league players include Real Madrid star Cristiano Ronaldo with US$230 million in assets and Argentine forward Lionel Messi with US$180 million, according to Wealth-X.

Earnings in sport – from sponsorship and wages – are on the up like never before, says Peter Cormack, financial planner at UK-based wealth manager Towry. “Sports industry revenues will always rise mainly due to the interest from companies buying TV rights and the money that this generates.” Earlier this year broadcasters Sky and BT agreed to pay a record £5.1 billion (US$7.7 billion) for live Premier League TV rights, a 70 percent increase on their current deal. Under the new contract, 168 games will be shown at an average cost to the broadcasters of £10.2 million per match, underlining the eye-watering costs associated with sports. And bigger TV audiences translate to golden handshakes for players. Deloitte predicts that Premier League clubs’ player spending will total a record £2.5 billion in 2016/2017.

Among the most affluent sports today are football, golf, tennis, basketball, car racing and boxing, some for their eye-watering wages and some for their lucrative sponsorship deals. The wealthiest F1 drivers have a combined US$1.6 billion between them, according to Wealth-X, with German seven-time world champion Michael Schumacher at the top of the list with a US$780 million fortune. As for basketball players, the top ten richest NBA players have combined assets of US$1.7 billion, lead by LA Lakers guard Kobe Bryant, who has assets of US$290 million, and Cleveland Cavaliers player LeBron James, with US$280 million.

“Sportspeople never used to be rockstars,” said Mike Byrne, UK director at Wealth-X.. “But over the last ten years compensation has gone through the roof, and looks set to continue as long as the fan base grows.”

Stars are compensated differently according to the sport. Team players like footballers and basketball players earn more money from contracts and wages and the best get supplementary sponsorship deals. Solo athletes like F1 drivers, tennis players and golfers rely more on winnings and endorsements, said Byrne. And while they may be at the top of their game on the pitch or the track, but when it comes to managing their money, sports stars keep getting their fingers burned. Which is why a growing number of private banks and wealth managers are targeting sports stars as a lucrative – and needy – sector.

Earlier this year it was reported that a number of sports VIPs had been linked to an alleged tax avoidance scheme run by London film firm, Ingenious Media. Those linked included footballers past and present Gary Linekar, David Beckham, Steven Gerrard and Wayne Rooney, and former England cricketers, including ex-England Captain Michael Vaughan, Paul Collingwood, Matthew Hoggard and Ashley Giles who are reportedly liable for unpaid tax. (Ingenious Media denies these allegations and believes the partnerships to be bona fide commercial film partnerships. Ingenious and HMRC are currently involved in proceedings before the First Tier Tribunal over the tax status of the partnerships.) Meanwhile ex-England goalkeeper David James was reportedly declared bankrupt last year after he allegedly lost over £7 million on bad property bets and gambling. Meanwhile in the US, as many as 78 percent of NFL players are either bankrupt or under financial stress within two years of retiring. In the NBA, 60 per cent are bankrupt within five years, according to a 2009 report.

The reason, more often than not, comes down to bad advice.

“The problem is that sportspeople often get very wealthy, very young, and are often not well-versed in accounting matters,” pointed out Lee Goggin, co-founder of Findawealthmanager.com, a London-based guide to wealth advisors.

Sports stars have uneven income streams and an uncertain end to their career from the threat of injuries. While some are able to go into sports coaching, media, or even like ex-footballer Robbie Fowler, property investment masterclasses, many have no obvious career post-thirty.

“The taxman does not take this peculiarity into account either,” pointed out Goggin.

These types of clients require a “really 360 solution which encompasses some hardcore tax planning and jazzy structures,” he added. Guernsey image rights are a way sports stars can monetise their recognisable features and then structure that (and bequeath) it as an asset in its own right.

Wealth managers including UBS, Coutts, Barclays Wealth, HSBC Private Bank, Schroders and Standard Chartered Private Bank have specialist sports wealth management desks to cater to millionaire sports stars. US investment banking giant Morgan Stanley recently opened a specialist unit in the US, and at the other end there are middle-tier advisers like Smith & Williamson and Wetherby’s.

It is a changing playing field. Coutts is now advising its sports star clients to prepare themselves for the power of social media. As the influence of sport grows, this will be the next big money-maker, said Simon Hopes, executive director, sports & entertainment at Coutts.

“Because of social media, image rights have never been more important. It is vital that sports men and women have expert representation to maximise their earnings opportunities in this area and grow their brand judiciously,” he said.

“Digital content needs controlling as whilst incredibly powerful, the potential for catastrophe is huge,” added Hopes.

Players clearly need more advice as they earn more and as media evolves. For wealth managers there is a big opportunity as well as growing competition.

Those agencies that flourish will be those that can offer full service packages that will incorporate contract negotiation, brand management, digital and social media content management, merchandising, image rights and intellectual property or forge trusted partnerships to ensure that these services are fully exploited.

A version of this story previously appeared in digital magazine Adoreum.-Wealth-X

Tara Loader Wilkinson