In 1993 a local financial advisor with Shearson Lehman Brothers was soliciting me to get to my clients Todd Rucci and Earl Dotson. I met with him in his office and heard his presentation. He was cocky, but made a sound and even conservative pitch of using muni bonds and outside money managers with good track records. However, a few things he said didn’t make sense. The next day I called his compliance officer and asked if the advisor had any “yes” answers on his U4/U5 form, (a registration form that tracks the movement and disciplinary actions against an advisor). The compliance officer said he had several disciplinary actions. I then called his manger and asked the manager how much money he had under management. The manager told me about 20 million. The advisor had claimed 100 million in managed assets. Two phone calls and 15 minutes of my time was all it took for me to pass on letting the financial advisor, John Gillette, anywhere near my clients. He later went on to leave Shearson, start his own firm and embezzle millions of dollars from several well-known NFL players.
Another advisor who was trying to get to my clients was a guy named Don Lukens out of Oxnard, California. Don wooed several of the top agents in the business to funnel him clients. He looked the part, was smooth, well dressed and mild mannered. However, he would take prospective clients and agents to Vegas via a private jet for ringside seating to watch heavyweight-boxing matches that included Holyfield and Tyson. He would flip the bill for a luxurious weekend that had to easily cost over 100k per weekend. He also would imply that he was the primary investor for Bill Cosby, Charles Bronson and Don King. I asked him to send me a list of five of his clients I could talk to and the names and numbers of his former employers. I also asked for a copy of his U4/U5. I never heard from him again. Don was later investigated by the FBI and the SEC filed a complaint against him.
It looks like another 40 or more NFL players, including Terrell Owens, have lost millions in a bankrupt Alabama casino project with investor Jeff Rubins.
Unfortunately, there is no fail-safe method to avoid losing money in any investment. I know, I lost enough myself and a lot of athletes are attracted to sexy investments and charismatic investors. Even well meaning investment advisors can lose money and conservative investments can go south as well.
So what should NFL players look for when hiring an advisor and monitoring their performance? Here are ten rules to follow that can decrease the chance of falling victim to an unscrupulous advisor.
1) Agents are not qualified to screen or recommend a financial advisor.
2) The more an advisor spends on wooing you, realize that the money has to come from somewhere, most likely another clients accounts and eventually your own.
3) If an advisor spends the majority of their time living the athlete lifestyle, (partying, always at games, playing golf all the time, etc.) he/she is not watching your investments.
CONTINUE READING ABOUT FINANCIAL ADVISORS ON PAGE TWO...
4) Ask the tough questions: Ask for a copy of their U4/U5/U6, a personal credit score, their last two employers and the number of their compliance officer. In addition, you can go to brokercheck.finra.org to see if there have been any disciplinary actions. You will also need the advisors CRD# to complete a search. He/she should willingly give this to you if they have nothing to hide.
5) Pay the extra money for an on going checks and balances system. Use an accounting firm, a local businessman you may have known awhile or an investment attorney to review your accounts.
6) Just because a financial advisor is certified with the NFLPA does not mean they are “endorsed” by the NFLPA. The certification means very little.
7) Bigger can be better. Big firms like Wells Fargo and Merrill Lynch have more stringent compliance rules then smaller independent advisors and deep pockets if the advisor does something wrong. It’s a nice backstop; just don’t let them load your portfolio with their own firm’s investments.
8) If you do want to swing for the fences in a sexy investment, limit it to 25k to 100k, or just 5% of your investable assets.
9) Never put your money into an account directly controlled by the investment advisor. NEVER! Never sign power of attorneys over to your advisor.
10) Don’t be impressed by the client list. High profile players and actors are notoriously bad judges of investment advisors. One uniform trait of advisors who have gone bad is that they have solely targeted athletes and had very little or no other professionals who they managed money for.
John Gillette would hang around the Chargers practices and facilities like a buzzard looking for road kill. Then, head coach, Bobby Ross, would look at him and tell his players (in a southern squeaky twang voice), “I wouldn’t give that guy a dime, slick back hair, pony tail, thousand dollar suits, big Ol expensive car. Hell No!" There are about ten former Chargers players who wish they listened to him.
A lot of common sense, a few weeks of due-diligence, a conservative approach and looking for the red flags can go a long way in picking the right advisor. I have noticed in my twenty-five years of being an agent and my ten years of being in the investment business that those with a boring approach to investing make for the best advisors.
Follow me on Twitter: @JackbechtaFollow @footballpost on Twitter for the latest news
This story originally appeared on Nationalfootballpost.com
- financial advisor