By the time Evan Rothstein meets his clients, many of them have already achieved their dream of becoming a professional athlete. His job is to do something almost as difficult: Help them keep the money they’ve made.
A lifelong sports fan, he’s a wealth adviser for Bank of America Merrill Lynch’s RVR Group and handles money for more than 20 professional baseball, basketball, and football players. Forbes ranked Rothstein as one of the top next-generation wealth advisers in 2018.
“I thought it would be great to work with guys who needed my help, and people that I could hopefully impart some of my wisdom and help them create a better financial life for themselves,” he told Business Insider in a recent phone interview.
Many of his clients are in their teens or early 20s, and they’ve just attained considerable wealth as newly minted professionals — and sometimes top draft picks. Almost anyone would find that enviable, but it also brings enormous challenges.
It’s a responsibility Rothstein takes seriously: While pro athletes can make millions, the career of a non-superstar is likely to end after just a few years. Despite the large sums of money they make, a large majority of NBA and NFL players file for bankruptcy within five years of their retirement.
Rothstein says some of players’ biggest errors happen once they sign their first big contract. Possibly feeling set for life, the players can make some predictable errors.
“The biggest mistake that they make is they just burn through cash,” he said. “They go immediately and buy a car outright. They don’t finance it or they don’t lease it.”
He continued: “I’ve heard stories of other guys literally taking a couple hundred thousand dollars, walking into the dealership, buying a Porsche, and then taking the money, throwing it in a bag and going to Vegas.”
He added that his clients’ wealth could also make them a target, describing one client who had been offered a guaranteed 20% monthly return on a bitcoin investment.
“You have to keep an eye out for people who are trying to do harm to your clients,” he said.
While it’s not unusual for professional athletes to get multimillion-dollar signing bonuses, the situation for baseball players is particularly complicated. After being drafted they can spend years slowly working their way through the minor leagues, where Rothstein estimates that pretax salaries range from $1,400 to $3,000 a month.
Once players make it to the major leagues, the minimum salary is a healthy $550,000 a year for those who remain there for an entire season. Those who don’t, at some point, will find their careers over at a pretty young age.
“Budgeting is a huge issue, making sure guys understand they’re not going to be making a lot of money until they hit the majors,” he said.
Despite the scope of their earnings, Rothstein notes that his clients have complicated financial situations and that many are starting with little knowledge. So they don’t understand why it may be a good idea to take out a mortgage or lease a car they can afford and invest the rest to take advantage of compound interest. Many of them don’t have a credit history.
That often puts Rothstein in the role of an educator. He says he’s determined to help his clients beat the general professional statistics.
“Building a foundation of financial education for these guys is like building a house,” Rothstein said “You’ve got to start with that foundation and understanding of what these things mean and how they work together, and what that means for them personally.”