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Protect the Fortune: How NHLers work to set themselves up for life after hockey

Setting up for life after hockey can be difficult for professional athletes. Just ask Jack Johnson. But there are steps NHL players can take to protect themselves and protect their fortunes.
The Hockey News

The Hockey News

Michael Cammalleri once said he can tell who is on the ice playing against him at any given time simply by looking at the brand of his opponent’s stick and how he tapes it. Hockey players are so meticulous with their own sticks they’ve been known to send batches back to the manufacturer because of the most minor flaw. Gary Roberts was so in tune with his body when he played that all he had to do was pinch his skin after he woke up to determine whether he’d load up on carbohydrates that day or base most of his diet on proteins.

When it comes to their performance off the ice, hockey players leave absolutely nothing to chance. They leave no stone unturned in the quest to make themselves the best players they can possibly be, and they do everything in their power to ensure they’ve giving themselves the maximum opportunity to be successful. For some of them, such as Columbus Blue Jackets defenseman Jack Johnson, that doesn’t leave a lot of time to become financially savvy.

And the hazards are potentially devastating, as Johnson found out when he applied for Chapter 11 bankruptcy two days before this season began. For Johnson, it appeared to be an issue of trust. He trusted the wrong people – his parents – who told him to worry only about playing hockey, and he is paying millions of dollars he hasn’t even made yet for his blind faith. But Johnson is hardly an isolated case, even in hockey. Poor financial decisions have affected Hall of Fame players from Bobby Orr, Bryan Trottier and Mike Modano to 50-goal multi-millionaires like Dany Heatley to lesser stars such as Derek Sanderson and Darren McCarty.

Take Orr, for example. He now represents some of the wealthiest players in the NHL as an agent, a profession he embarked on in part because of his dealings with his former agent, Alan Eagleson. In his biography, My Story, Orr chronicles how Eagleson ran almost every aspect of his life. “He controlled my money, he controlled my schedule, and in my mind he was in control of my life.” And that willingness to cede control left Orr, the first player to sign a multi-million dollar contract, in terrible financial shape after his career ended. “(Eagleson) had left me practically broke,” Orr wrote. “Where all the money went, I will never know. A huge part of what remained was eaten up by unpaid taxes. Whether this was due to incompetence, greed or malice on (Eagleson’s) part is impossible to guess. At this point it doesn’t matter. What mattered to me then was that I was watching what remained all but disappear.”

Sports Illustrated once reported that 78 percent NFL players are either broke or in financial stress within two years of retiring. And it’s the same story in basketball, according to the NBA’s own players’ association, with 60 percent of its players broke within five years of ending their careers. The NHL Players’ Association keeps no such statistics because it doesn’t have a certified financial advisors program, but it’s believed the ones who go broke in hockey are the rare exceptions. That may have something to do with the socio-economic factors in their upbringing – by the nature of how much it costs to play, elite hockey players tend to come from more financially stable families. Others think it could be because hockey players tend to be a little more conservative than their brethren in other sports.

But it can happen, as Johnson found out. And in some, but not all of the cases, the players who lost money did so because they placed an inordinate amount of trust in people who were either unscrupulous or incompetent, or both. And the same player who can tell an opponent by a minute detail such as how he tapes his stick leaves his finances to others without any knowledge of where the money is going or even the ability to ask the right questions. “A lot of the guys I played with, and I include myself in that, we’re way too trusting,” said former NHLer Stew Gavin, president of Gavin Management, which handles wealth management for a number of NHL players. “We often give away that trust blindly. Players are so diligent about their nutrition and their training, and if they put even half of the effort of what they need to do to be a great athlete and channel that into the financial side, then they’d be much better off.”

Rand Simon is a former editor/writer at The Hockey News who entered the agent business with Newport Sports Management two decades ago. Since then he has become a certified financial planner and handles the finances of any of the hundreds of players represented largely by super agents Don Meehan and Pat Morris who request it. On this day, his desk is scattered with paperwork – a tax refund check for a player for more than $13,000, a state request for $800 in taxes from another. Simon was asked how he would go about planning the finances for a player coming out of his entry-level contract who signs a five-year extension worth $20 million with the Montreal Canadiens, along the lines of the six-year, $22.5-million extension Brendan Gallagher recently signed. The first thing Simon points out is that $20 million over five years sounds like an enormous amount of money because that’s exactly what it is. But what some players don’t realize is that $4 million a year actually amounts to about $1.6 million per year after taxes and expenses. It’s still a ridiculous amount of money but not even half what tell you he’s making.

So let’s take the case of the player making $4 million a year in Montreal. The first thing the player has to realize is that 14 percent of that will be gobbled up by escrow payments every year. That accounts for $560,000 right there. Agents are anticipating players will receive about two percent of that back, which means he’ll be reimbursed about $80,000 for a total escrow payment of $480,000. That takes his net take-home pay to $3.52 million, half of which he’ll pay in income tax in Quebec, which brings his total down to $1.76 million. Then agent fees account for three-to-six percent, depending on the level of services rendered. So if you apply four percent to the post-escrow amount of $3.52 million, he’s paying about $140,000 in agent fees, bringing his total down to $1.62 million. “That’s probably the most shocking thing for young players,” Simon said. “Because as a percentage of $4 million, that’s 40.5 percent. Now if this player had been in Tennessee or Florida, he’d be better off from a tax point of view because there’s no state tax. If he were in California, he’d be slightly worse off and if he were in New York City, he’d be even worse off.”

What a lot of players don’t realize, too, is that, even though they make so much money, their retirement funds will have to last them 50 years post-retirement instead of 20. But some of that can be put into equity such as property, either in the city in which he plays or the place in which he spends the off-season. If he buys an off-season property, he might be better off paying rent and utilities in his hockey city, something Simon often recommends. “There’s nothing wrong with renting in your NHL city,” Simon said. “Everyone gets traded. And if you buy real estate and don’t hold it for very long, it ends up not being a good investment. If you sell in two years and you’re paying land transfer tax to buy it and you’re paying real estate commission of six percent when you sell it, it can be hard to make money.”

Players also must pay about $10,000 to $15,000 a year in disability insurance to cover them if they have a career threatening injury when they’re not playing hockey. And if they’re going into a year when they know they’re going to sign a big contract, they’ll want to get additional insurance to cover future earnings against injuries on and off the ice.

And they become targets for everyone from family to friends to hangers-on to even teammates. “I find whenever you start making lots of money, you have lots of friends,” said Toronto Maple Leafs defenseman Stephane Robidas. “It’s tough to earn money, but it’s really easy to burn.”

And this is precisely where players get into the most trouble. It allegedly happened with Johnson and his parents. It happened with Orr and Eagleson. Heatley lost $10 million because of an associate of his agent and Modano lost about $5 million under similar circumstances. It’s all about asking the right questions and demanding satisfactory answers, both Gavin and Simon said. Gavin gives each of his clients a 10-question checklist of key queries players should make when they deal with financial advisors. Simon said he tells players that any would-be investors, even if they’re close family and friends, run their ideas past the agent, who then makes the decision as to whether or not it’s a good investment. That way, the agent can act as the bad guy instead of the player if someone close to the player comes up with an ill-advised scheme. Most players listen to the advice, some don’t. “The most important thing is these guys make enough money from their careers that that’s where all their wealth should come from,” Simon said. “They don’t need to be doing things outside their careers. Just take what you’ve earned, preserve it, grow it a little bit and you’ll be fine. It’s very basic. It’s cash, bonds, stocks, real estate. You don’t need to put your money into anything else.”

Gavin said when one of his NHL clients joined him recently, the first thing he did was ask for a statement from his financial advisor. What he received was one page, without letterhead, with some numbers in bonds and equity. “I thought it was a fraud,” Gavin said. “I was so scared for the guy because you start thinking, ‘Your money is not where you think it is.’ We were eventually able to get it out.” Some aren’t so lucky. By the time Heatley contacted Gavin before suing his former agent Stacey McAlpine for $11 million two years ago, most of the damage had already been done. “They’re still trying to find the money,” Gavin said.

Former NHLer Aaron Ward, now a broadcaster for TSN, said every athlete should be mandated to watch the ESPN documentary Broke, which chronicles the rags to riches back to rags stories of a number of high-profile athletes. Ward said when he received his first signing bonus of $225,000 in 1993, it was directed to an independent investment broker agreed upon by his father and his agent at the time. That provided the foundation that would be his safety net as he made money throughout his NHL career. Everyone, including Ward himself, was concerned that kind of money in the hands of a 20-year-old kid might find a way of disappearing pretty quickly.

As Ward matured as a player and person, he took a greater control over his own financial affairs. Nobody else ever had power of attorney over his finances and Ward said he prevented anyone from taking advantage of him by ensuring he was on top of his finances. “In the end, there was one person who made the final decisions about my money,” Ward said, “and that person was me.”

What it comes down to, basically, is the same common sense anyone else has to use when it comes to finances but on a much larger scale. So if you’re pulling in $1.6 million a year, it’s probably not a good idea to buy a house worth $12 million. If you are already making enough money for you and your children and your children’s children to live comfortably on, there isn’t much sense in investing in high-risk, high-reward ventures. And it’s important to remember that, like the ordinary person, most of your personal worth is going to be derived from your income. “What I tell young players is, ‘Yes, you get to enjoy this newfound wealth, but this is also the time you start saving,’ ” Simon said. “Most of it comes down to common sense.”


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