NFL Players Association Cracks Down on “Approved” Advisor List
Following several highly publicized cases of professional athletes losing fortunes through bad investments, the National Football League Players Association is raising the bar on advisors seeking to make its “approved” list.
The union’s board in March proposed a rule that would restrict the list to candidates that have Certified Financial Planner or Chartered Financial Analyst designations, according to Dana Hammonds, senior director of player affairs and development at NFLPA. The rule is pending approval from the Securities and Exchange Commission.
In another effort to improve its members’ financial training, the union last year created a “managers” program in which NFLPA staffers are paired with members to help them assess their financial needs and review and evaluate pitches from financial advisors.
“We’ve tried to pair them with individuals who can help them navigate this and serve as an unbiased second opinion,” Hammonds said.
Professional athletes can select any investment adviser they choose, of course, but agents for pro football players are restricted to making referrals only to advisors on the approved list, she said.
Making the list, which the union created in 2002 and currently includes 250 advisors, can be a boon since word-of-mouth travels fast in locker rooms.
However, the NFLPA list has been clouded by scandal in recent years amid reports of pros descending into bankruptcy within years of their retirement and lawsuits and regulatory penalties against advisors charged with fleecing their celebrity clients. Big brokerage firms have, in turn, sued some of the rogue advisors, several of whom were on the NFLPA approved list.
The issue gained renewed attention this summer when “Sports Illustrated” reported that retired running back Clinton Portis almost killed one of his advisors after losing millions of dollars based on their recommendations. Two of his advisors had the Players Association’s seal of approval.
Another, Kenneth Ray Cleveland, was indicted in May on charges of bilking an unnamed ex-player of $4.5 million.
The union’s tightening of its list requirements is not directly related to the most recent scandals, Hammonds said.
“Often times, we are researching and going through the process of identifying ways to make enhancements, way before some of these things even hit the news cycle,” she said.
The union requires advisors applying for its approval list to submit to a background check, have at least eight years of experience, $4 million in insurance coverage, no pending customer complaints and no record of civil, criminal or regulatory issues alleging fraud, she said.
About 65 advisors apply annually, paying a non-refundable initial application fee of $2,000. To remain on the list, the union assesses a $500 annual membership fee.
The NFLPA’s Committee on Agent or Advisor Regulation and Discipline (CARD) monitors compliance with list requirements and can revoke registration. Advisors can appeal CARD decisions through arbitration.
In a bid to improve its members’ self-reliance and judgments in picking advisors, players are encouraged by union staffers who act as “managers” to enroll in NFLPA’s financial literacy programs. The curriculum ranges from basic concepts such as budgeting and accounting in the first year of the program to more sophisticated investing ideas and methods for picking trusted associates in years two and three.
Pro athletes who suddenly come into big money often find themselves blind-sided by advice, solicited or unsolicited, the program begins with a core principle.
“When we first start talking to players, we tell them, ‘if you don’t understand something then you should not invest in it,” Hammonds said. “If you cannot explain what it is you’re getting involved in, how you are to make your money, how the advisor is going to get paid – if you don’t understand it, that should be your first warning sign.’”
Although the NFLPA is not itself registered as an investment adviser, changes it makes in rules to qualify for the advisor list require SEC approval because of the membership fee that the union charges advisors. The union has to ensure that it does not appear to be soliciting its members on behalf of the advisors.
The list is not an endorsement of “the skill, honesty or competence” of any registered advisor, according to NFLPA’s website.