Sport and the tax authorities have a lot in common: penalties, poor form, complex transfer rules. Freddy Barker on the rewards — and risks — of sports wealth
IN THE UNLIKELY event that Dwain Chambers wins the Olympic 100 metres on 5 August, he’ll be rewarded with more gold than the medal. Sponsorship deals will spring from the four corners of the earth and he’ll be asked to endorse everything from cereal to satellite dishes.
Just look at Britain’s heroes from Beijing 2008. Chris Hoy and Rebecca Adlington won their cycling and swimming golds in a matter of minutes and received contracts from Shredded Wheat and British Gas just as fast. One doesn’t even have to win to win contracts. Think of Eric the Eel, the swimmer who nearly drowned en route to a bizarre victory in his 100 metre freestyle heat (thanks to false starts by his only two opponents) at Sydney in 2000 yet was still signed up by Speedo.
When it comes to counting up your treasure, team spirit goes out of the window. ‘Although Olympians line up in national teams,’ says Matthew Wotton at Barclays, ‘athletics is fundamentally an individual sport. The challenge therefore is to remain the best in the world for as long as possible, and to maximise and monetise that time in the public eye through endorsements, sponsorships and personal appearances.’
With the likes of Usain Bolt reaping £12.5 million from Puma, there are a whole host of wealth managers competing to manage athletes’ assets, and although Barclays, Coutts and London & Capital lead the field, the heightened profile of the European Football Championships this summer as well as the Olympics will lead to many more market entrants.
‘Part of the reason is that sport is remarkably resilient to the downturn,’ says Wotton. ‘It plays to people’s passions and provides a welcome release from the daily trudge.’ As such, income streams from television deals are still on the rise.
For all the hype, it’s not so much athletics that wealth managers are attracted to as sports stars across the board. According to Forbes, golfer Tiger Woods made £37 million last year, boxer Manny Pacquiao netted £42 million and tennis champion Roger Federer pocketed £33 million, with much coming from Nike, Wilson, Crédit Suisse and Rolex. By contrast, Britain’s third best 200m sprinter, James Ellington, earns so little that he recently sold his branding rights on eBay for £30,000.
Illustration by Russ Tudor
DESPITE THOSE EYE-watering sums, many sportsmen injure themselves financially. Eurosport reports that Dennis Rodman, the former NBA star known as much for marrying Carmen Electra and having an affair with Madonna as for his basketball prowess, blew £20 million on trinkets, including a 47-foot speedboat called Sexual Chocolate and a pick-up truck emblazoned with his portrait on the bonnet. And if that weren’t extravagant enough, try the boxers. Evander Holyfield spent £150 million on two marriages and a 109-room house, while Mike Tyson bought pet Bengal tigers and a £1.2 million bathtub.
‘Closer to home,’ says Sebastian Stafford-Bloor of ThePremierLeagueOwl.com, ‘we’ve seen a similar trend. The average wage in the top flight of British football climbed, once the maximum wage cap was abolished, from £20 a week in 1961 to £33,000 a week 50 years later. Yet players still score financial own goals.’ For example, LA Galaxy star Robbie Keane was stung for £20,000 this year in a suspected Ponzi scheme promising 20 per cent a month. And he’s not alone. Those players declared bankrupt reads like a Who’s Who of the Premier League: Brad Friedel, Carl Cort, Colin Hendry, Jason Euell, John Arne Riise, Keith Gillespie and Lee Hendrie.
‘While some seal their own fate,’ says Mike Kerridge at Chater Financial, ‘many are victims of bad investments. The greatest threat currently is property in Bulgaria, Morocco and Spain which, packaged as money-spinning developments, accumulate little more than dust.’
Travesties happen because many sportsmen receive bad financial advice. It is difficult to say whether there are a disproportionate number of financial cowboys in sports wealth management or whether the victims are simply higher-profile. But dangers are abundant. As sportsmen rise through the ranks, their main influences are agent and family. It’s when they are thrust into the limelight that the game changes, and the vultures start to circle.
Trade bodies say that there are buffers in place, but sports stars consistently report that as millions start tracking their every move, they conversely feel increasingly isolated. Moreover, their new lifestyles reinforce the cycle. The sense that they are commodities builds, so it is little wonder that they live in short-term financial bubbles. Typically they have a big house, an equally large mortgage, two leased cars, a portfolio of buy-to-let properties, a pension and an image rights company. Despite the stereotype — Chelsea’s Frank Lampard is nicknamed ‘The Professor’ despite not having a single A-level — many are streetwise enough to realise that they need help managing their affairs.
Take image rights companies. Historically they have been attractive as they’re taxed at corporate rates rather than individual ones. ‘But they are set to attain a greater degree of legitimacy,’ says Jason Romer at Collas Crill, ‘as Guernsey has initiated legislation that will finally recognise images as separate intellectual property rights, thus giving legal certainty for the first time.’ To the well-advised, that means 0 per cent tax opportunities on their biggest income stream.
There are fast-moving developments in pensions, too. In 2006, Tony Blair changed the sporting retirement age from 35 to 55, and although sportsmen are instinctively aggravated because it means they have to earn money from other sources in the interim, the reform equally provides them with safety as, given a generation to compound, their pensions are worth much more.
Ensuring that they don’t go from feast to famine in the meantime are three key wealth managers. The smallest is Adam Osper’s team at London & Capital, which prides itself on offering low-risk liquid products. ‘We are not doing anything exciting,’ says the Spurs fan. ‘We are doing the simple stuff right. For example, we like to get sportsmen to save a week’s wages on a monthly basis as that gives them a safety buffer.’
With 40 clients, the chartered financial planner faces much larger opposition in the form of Barclays. The Premier League sponsor, it has a particular niche with footballers as, for example, non-English-speaking players signing at 11.55pm on transfer deadline day will often bank with the same establishment as their club, and if the Professional Footballers’ Association wants to recommend a partner, it will recommend Barclays. Yet as Matthew Wotton, head of sport and media, says, ‘New-to-UK players will usually receive a shortlist, and we at Barclays work hard to justify our inclusion and take nothing for granted when the call comes through.’
THE FINAL MEMBER of the sporting triumvirate is Coutts. Its lure lies not only in its luxury brand (Stella McCartney and Ozwald Boateng design the credit cards) but also in its lending facilities. Sports stars lead highly mortgaged lives and as Harry Keogh, managing director of sports and entertainment, says, ‘We can provide the whole range of banking, investment, trust and tax services under one roof, which ultimately makes life much easier for the client.’
With these three options, and more market entrants to follow, sports stars can be assured of a healthy future. That’s something given the tax situation that currently prevails — Usain Bolt, for example, recently refused to compete in the Aviva London Grand Prix because HMRC would have taken 50 per cent of his appearance fee and a proportion of his worldwide earnings. Never mind their trackside rivals — it’s the taxman snapping at top athletes’ heels.
Read more by Freddy Barker