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Indie RIA Grows its Professional Athlete Business With Key Partnership Deal

By Crucial Clips     November 5, 2019
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Oct. 31, 2019 

RITA RAAGAS DE RAMOS, SPECIAL PROJECTS MANAGER, FINANCIAL ADVISOR IQ: Hi, I'm Rita Raagas De Ramos from Financial Advisor IQ and with me is Leo Kelly, CEO and partner at Verdence Capital Advisors. You said that athletes are among your choice target clients, and it's one of your [areas of] expertise. So out of the roughly $2 billion in AUM that your firm has, how much of that is from client assets from this particular group?

LEO KELLY, CEO AND PARTNER, VERDENCE CAPITAL ADVISORS: Well, our athlete business is relatively new. So, it is a small portion of our overall assets, but it's our fastest-growing segment. What we've done with the athlete division is -- my partner Rich Rosa was an NFL agent for over 20 years. And he had a reputation of a very relationship-based advisory role with his clients, not transactional. And over time, what Rich realized is, he would have this relationship through his career -- then when the player left, that relationship was still there but they had no business mechanism to continue their relationship. And Rich came to join me and our firm as a partner because what he brought to us was a problem. He showed us what was happening in athlete portfolios, and he showed the lack of planning and the lack of pure advisory relationships that existed in that business. And what we endeavor to do in starting this business is to create an environment where these players are treated like business owners, and they get professional unconflicted advisory relationships. We have three pillars in our business — education, empowerment, and unconflicted solutions. That's what we're trying to bring to the athlete. If we do that, we’ll turn these statistics around about athletes running out of money. If they start to act like business owners, which is the majority of our business, then they'll be more successful. And once that that word gets out, we shift the paradigm of athletes and their success. That's our goal.

RITA RAAGAS DE RAMOS: Do athletes have demands that are vastly different from your other clients?

LEO KELLY: It depends on the athlete. So, for example, a lot of our clients are offensive linemen and defensive linemen. They're lunchpail guys, they’re family men. They're very smart. They've worked hard their whole lives. They didn't have the glory of running through the end zone spiking the football; they opened up the hole. And they're hard-working folks. And you know, what we find is they want to save, and they want to be successful, and they want to have smart decisions made on their behalf. They just need the resource. So, it's a personality thing.

RITA RAAGAS DE RAMOS: What are the common mistakes that athletes make when it comes to their money?

LEO KELLY: Well, if I was to say what are the most common mistakes for athletes, I would put really two above all else.

The first is really understanding the relationship they have with their advisor. Frequently, what an athlete will do -- because they start with small amounts of money and it explodes if they get a couple contracts later -- they find the advisor that's maybe from their neighborhood or [their] parent’s advisor or a friend who went to college or an alum, and they find an advisor who's used to smaller accounts and does a lot of commission-based products. And they get going, and they just trust that advisor and they essentially turn the entire relationship of trust over to the advisor. Then, suddenly, when they get the big money and the big contract comes in, they don't make the adjustment. They don't do the due diligence to see if that advisor, the same advisor that manages $200,000 or $300,000, is equipped to manage $20 million. And so, what we see is a lot of portfolios that look like a $300,000 portfolio in just bigger quantities that add up to $20 million and that doesn't make a whole lot of sense. It doesn't make sense for an athlete with $20 million to put $3 million in a product that pays 10% commissions. It's illogical.

The second problem with athletes and their money is a lack of due diligence and understanding in private investments.

RITA RAAGAS DE RAMOS: What is the most valuable advice that you can give them?

LEO KELLY: Well, I think the most valuable advice we can give an athlete is to spend a lot of time on the front end, understanding who is giving you advice. Ask questions. How do you educate me? How do you increase my level of learning so I understand what you're doing, and I can build my own standing over time? And the question then, if you're going to ask the question, you have to follow through with the effort and become educated. How are you going to empower me – meaning how are you going to build my wealth and build the safety around my assets so I'm empowered to make decisions like when I'm going to retire, what team I'm going to play for, what kind of contract I need, what I'm going to do in my next life? That's empowerment.


LEO KELLY: My pleasure. My pleasure.

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Tags:  Client retention , Behavioral finance

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