The Absolutely Necessary, but Potentially Dangerous Combo: Athletes and Financial Advisors - Experiencing Financial Contentment

The Absolutely Necessary, but Potentially Dangerous Combo: Athletes and Financial Advisors

This week there was a headline of yet another group of athletes that were cheated out of millions by an individual claiming to have their best interest in mind.  There are a number of reasons I wanted to opine on this headline not the least of which are that is causes several emotions in me from sadness to anger to empathy.  Why sadness?  Because this instance seems to have been avoidable if only a few “checks and balances” were put in place (see below).  Why anger?  Because as a member of the financial services community for nearly 20 years now, I’m embarrassed of the image that it paints to the public.  The wall of distrust it builds makes it just that much harder for individuals to place their faith in financial advisors.  Why empathy?  Because at the end of the day, athletes are just people.  They happen to be in a unique situation where they make the bulk of their lifetime earnings early in their careers and it is imperative that they leverage that for when they can no longer compete on their field of play.  So any financial missteps could have exponential consequences for them and their families.  In nearly all cases, it helps to have the assistance of a good financial advisor, unless you can save like Marshawn Lynch (which is not a bad idea anyway)!   My goal in this writing is to outline some steps that can be taken to provide athletes with ways to avoid getting into situations like this.
Trust but Verify
In the case in question, court documents state that the athletes were “introduced to Narayan and came to trust him”.  My advice is to not just take someone’s word for another person’s reputation.  When seeking out the services of a financial advisor, research any referrals you get.  Even if a player’s association (e.g. NFLPA) “stamps” someone, make sure you vet an individual yourself.  Why?  because it is really easy to do thanks to the Internet.  Here are some ways you can find out if the financial professional you are looking to work with is legitimate.  First, understand that each financial professional should be regulated by some federal entity.  There are only two:  the Securities Exchange Commission (“SEC”) or the Financial Industry Regulatory Authority (“FINRA”).  Do yourself a favor and run a quick search before working with anyone.  Here is the link.  Why is this so important?  Because for very little effort, you can perform this simple check and potentially save you from working with the wrong person.  Look for any disciplinary actions and inconsistencies. For example, in the subject story, Mr. Ash Narayan claimed to be a Certified Public Accountant (“CPA”).  However, per his SEC disclosure page (under professional designations) CPA is not listed.  On purpose or on accident?  My point is that arming yourself with a little bit of information helps you ask very good questions.
Access to Bank Accounts…uhhh no!
I’ve read too many of these type of stories where advisers had direct access to a bank account.  Although in this case, Mr. Narayan forged signatures, recognize this is a major red-flag.  There is no reason an adviser should have access to your bank account.  Keep control in your hands, don’t delegate access to your bank account to pay bills, etc.  When money leaves your bank account it should show up at a financial institution.  There are many out there and you’ve probably heard of most of them like National Financial Services, Pershing or Charles Schwab.  After your money shows up there, the custodian is required to send you a monthly statement detailing the activity in your brokerage account.  This is the evidence proving that the withdrawals from your bank account reached the proper destination.  Watch out if someone is telling you to get those sent to you electronically.  In the case of athletes, I’d recommend also receiving them by paper so you can actually see it with your own eyes.  If your financial advisor produces internal statements you should still reconcile them back to the custodian’s monthly statement.
The Greater Good
As I understand it, Mr. Ash Narayan worked his way into the good graces of these athletes by using their affinity to charitable causes to “sell” his services.  As a high-profile athlete, you must understand that you will be “prey” to a lot of individuals.  Regrettably, some of those individuals are in the financial services community.  So this is why you really need to build a network of “ride-or-die” individuals that can help you personally and professionally.  Like in Ballers, you need a Reggie (the homeboy) and a Spencer Strasmore (the numbers guy).  I’ve written previously about building an All-Star Team and in that piece, I go into greater detail on how to do just that.
Big Firm or Small Firm Doesn’t Matter–Focus on the Individual
In the long run this shouldn’t really matter.  You obviously want to work with someone who will be around for a while to handle your affairs and not close up shop during the next recession.  Small or large firm is just a matter of preference, however, I think forming a good list of questions to “vet” an individual is the most important.  Let me outline a couple you should consider adding to your list:


Q:  What licenses do you need to practice and how are you regulated?
Here’s why you want to ask…you want a licensed professional because the licensing is how they are held accountable.  Granted, it is not foolproof, but it is a good start.  I would also look for someone who has 10 or more years of experience.  Advanced degrees or other designations are not deal-breakers, but could be necessary based on your situation.  See this link for more info.


Q.  What financial institution or custodian will be holding my assets?
Here’s why you want to ask…because you can check into the bank’s reputation (e.g. how long they’ve been in business, amount of insurance coverage, etc.).  Red-flag alert:  Your advisor shouldn’t be holding funds of yours in a bank that you haven’t heard of.  They also shouldn’t be commingling your funds with their other clients or their own.  Having a reputable custodian will prevent all of this because of regulated account opening procedures.  See this link for more info.


Want more?  Read my blog.
The Maven of Financial Literacy

Dominique is owner of DJH Capital Management, LLC. a full service, comprehensive financial planning firm helping individuals build roadmaps to reach their financial dreams.

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