Kevin Garnett had an amazing career in the NBA. He goes down as the all-time leader in “on court salary” in history earning $326 million during his career…Today, he is suing because his retirement nest egg is missing a whopping $77 million. Garnett has filed suit against his accountant, Michael Wertheim, for allegedly allowing his wealth manager, Charles Banks, who is facing a 4-year sentence in federal prison for defrauding NBA legend Tim Duncan, to steal money from Garnett’s accounts.
Why does this happen to professional athletes time and time again? There are many answers but the most obvious is that most pro athletes don’t pay attention to anything but the sport they’re playing. They know they are making big money on the field or on the court, but don’t find out how much they’re losing until it’s too late.
Years ago, Raghib (Rocket) Ismail, the Notre Dame football superstar who earned as much as $4 million per year in the pros, recalled how indifferent and unconcerned he was when receiving financial advice…One time, he compared receiving financial advice to “listening to Charlie Brown’s teacher”.
Professional baseball player Jake Peavy said that he "needs a miracle everyday" after he discovered that his "trusted financial advisor" stole between $15-20 Million in a Ponzi-like scheme in 2016. In a recent Bleacher Report article, Peavy is quoted saying, "When you're in the baseball world, you're in a bubble. There's a lot of life going on around you that you can be blind to if you're not careful."
Pro athletes get bad advice all the time, are defrauded and convinced to make terrible investments, and, like Kevin Garnett, learn the hard way when their income stops in retirement. Professional athletes are one injury away from abrupt retirement and neglecting their investments is huge mistake. At Capstone, we don’t believe that investments in movies, music labels, high-risk restaurants, illegal casinos, and expensive wine to be building blocks in a high quality investment portfolio.
Eric Chemi, of CNBC, quoted a wealth manager who works with many pro athletes as saying, “This is just the latest example and it highlights the need for well-vetted fiduciaries for pro athletes.”