Today’s guest column is by Michael Bapis, managing director and head of sports and entertainment for Vios Advisors at Rockefeller Capital Management.
As we pave the way to recovery, the past year and a half has provided us with a valuable and insightful reality: The future is digital. Across all industries, including the sports industry, 2020 into 2021 was a time period unlike any other. Yet, despite the consistent uncertainty and volatility, the year has proven to be revolutionary for professional athletes. Their ability to control their own messages and maintain their own digital platforms to promote their brand and enhance their engagement has now become the foundation for sports marketing, endorsements and sponsorships as we move forward.
In addition, the new NIL rules for NCAA athletes have represented a tremendous shift in the association’s definition of amateurism, as every athlete will now have the opportunity to make money from endorsements and additional ventures, specifically monetizing their social media accounts. The new rules offer a chance for college athletes to build their own platforms to enhance their brands and help in making a profit away from the playing field.
Ultimately, it has been very uplifting to see sports come out of the dark as we recover from the pandemic and return to normalcy. But it is evident that the concept of branding and marketing for athletes and entertainers went through a transformation beyond the NCAA revolution.
In efforts to drive more demand and avoid losing additional profitability during the uncertain times, many professional athletes began promoting themselves through digital partnerships with specific companies. However, if these partnerships are not created with mindfulness and caution, they can be detrimental to an athlete’s brand and potential future earning power. It is in these situations where financial literacy is at the forefront in assisting athletes to make smart decisions. Social awareness is now key in developing their personal marketing and financial strategy, ensuring their plan stays up-to-date after their athletic achievements and careers end.
In some ways, these hazards are a new twist to an old story. As a financial adviser, it has been disheartening to see how many professional athletes go bankrupt due to lack of educational resources and assistance.
As our society has transformed digitally, the ease of access to specific information has become particularly prominent, for better and for worse. Hot topics in the investment world—such as engaging in the meme stock frenzy, jumping on the bandwagon in exploring cryptocurrencies and engaging in NFTs—all have impacted society well beyond the stock markets. However, engagement in these specific investment vehicles without any educational resources or financial literacy foundation can result in immense volatility and risky short-term emotional investing.
On a broader societal note, digital platforms have made athletes much more accessible to the public, which can be both a positive and a negative. The ease and speed of content’s spread across social media platforms can mean that a single, thoughtless post can come back to haunt an athlete, even years down the road. In 2018, Josh Allen was expected to be the No. 1 pick in the NFL Draft, and his actions on social media ultimately impacted the initial steps of his professional career.
For most athletes, there is also no easy fix for a significant financial setback. Athletes are unique in that their earnings are compressed into a handful of years, and they have to navigate volatility surrounding both longevity and uncertainty of their careers. That’s why it is so integral to work with a financial adviser to walk through the advantages and disadvantages of each financial decision and business opportunity.
Whether they are endorsement-based or investment-based, it is imperative for these professional athletes to have the resources they need to make the financial and branding decisions that will impact their lives for the better. There are five basic elements to financial literacy for athletes:
- Understanding the paycheck
- Creating a personal budget
- Saving toward financial goals
- Borrowing, from credit cards to major loans
- Protecting assets through fraud-prevention, insurance and retirement planning
Branding on social media is now a part of that mix. It has become a powerful, almost compulsory tool, since athletes need to have their brand visible online in order to catch the attention of fans—and to keep that attention and appeal.
There are prominent examples of athletes who have such a devoted fan base that their presence on digital platforms will always be successful, such as LeBron James and Alex Morgan. Athletes have also used digital platforms to their advantage to promote social change and awareness, as well as to deliver courageous messages which garner immense support, such as Las Vegas Raiders defensive end Carl Nassib. Such athletes are showing it is possible to make a good living in their sport while still pursuing their passions.
For my industry, it will be imperative to continue to track the specific trends of the digital market for both collegiate and professional athletes, while also continuing to educate athletes with key financial literacy components that will assist them in achieving success in an unfamiliar, unpredictable yet exciting environment of opportunity.
Bapis has more than 20 years of wealth management and private banking experience and has been a member of the CAIS Advisory Council since its inaugural year in 2018.