Who is your financial advice pro? Lessons from Andy and Vince

financial advice lessons

My one year-old son still loves to be rocked to sleep at night. As many young parents know, this is usually an easy time to do some quick (or even extended) reading on your phone.  While trying to avoid shining the screen towards his quickly zonking out face, I came across an interesting article on Andy Roddick and... investing.

In case you don't know, Andy Roddick is a 32-year old retired tennis star living in Austin, TX. What caught my eye about this article is that he has intentionally stayed away from the get-rick-quick investing style that plagues many sports stars.  And he learned to do that through two very smart strategies:

  1. He followed the advice of someone with his best interests in mind (his dad).
  2. He took an active role in his investments. 

How many sports stars or celebrities have you heard of that have gone broke shortly after the peak of their career?  I'll tell you about another former star that also has a connection to Austin, Vince Young. 

Vince was an outstanding college football player who led the University of Texas to a national championship in 2006. He had a solid start to an NFL careeer before flaming out and eventually retiring.  He earned $34 million over six seasons but filed for bankruptcy in 2014.  Vince is also the same age as Andy Roddick.

While I certainly don't know the ins and outs of Vince's financial decision-making over the years, there are several articles (including here and here) detailing some of what happened.  From what I can gather, Vince alleged that his (now former) financial manager misled him and took out loans in Vince's name without his knowledge or having access to the funds. It also seems that Vince let his financial manager take care of all of his bills. By not keeping a hand in his investments and ignoring his spending versus income ($5,000 per week at the Cheesecake Factory?!), Vince quickly dug himself into a very deep financial hole, which was exacerbated by the alleged wrongdoing of his financial manager.  

So what did Vince do wrong that Andy got right?

Vince let his "people" manage his money. His financial manager may or may not have had his best interests in mind, I don't know.  Andy's father was closely involved in his financial matters early on, and most parents have their kid's best interests in mind. 

Now, before you say that Andy growing up middle class or better while Vince had a tough childhood accounts for the differences in their financial outcomes. Or that the NFL is notorious for having a high rate of player bankruptcies post-career and the widespread culture of wild partying and extreme spending is to blame (which I agree was likely a part of the problem for Vince). We are ALL ultimately responsible for our own decisions regarding the money we do have.  What I am saying is that anyone you pick to manage your money should adhere to a fiduciary standard of service and required by law to manage your money for your benefit and not theirs or someone else's. And even if they are a fiduciary for you, you must verify that what they are telling you about your finances is true. 

Vince seems to have not taken an active role in his investments. He let others take care of the accounting while he spent, and spent, and spent some more. Andy became involved in his own investing strategy even while being in the thick of his tennis career. Vince's financial decision-making is ultimately his responsibility and he, along with anyone else no matter how wealthy, should be informed and understand what he is investing in.

Lessons from these two sports pros, only one of whom is a financial pro

So what can we take away from this?  You and I probably can't relate to making over $5 million a year (if you can and you are reading this, congratulations!), but the same lessons apply.

Be careful who you take investment advice from.  That includes friends and family who have a "hot stock" tip, or want you to fund their startup with promises of big returns. That includes what you read from me!  If you hire a financial advisor to actively manage your investments, make sure they uphold the fiduciary standard. Bankrate.com lists these questions to ask:

  • Are you acting under the fiduciary standard? Can you put that in writing?
  • Which licenses do you have?

  • Are you a registered investment advisor? Can I get a copy of your form ADV (SEC/state regulators registration form)?

  • If you are not acting as a fiduciary, are you willing to fully disclose all conflicts of interest and the amount of compensation received from advice and products recommended?

Read more about fiduciary standards at Bankrate.com

Pay attention to your money.  Even if you are married and your spouse takes care of all the finances, you should be an active participant in keeping track of what is coming into your bank account and what is going out. I "take care of" the finances in my marriage in terms of ensuring bills are paid and investment contributions occur, but my husband has the Mint app on his phone and we are both responsible for keeping an eye on our budget. We also have to be in agreement on any major purchases or investment decisions. 

If you hire a financial advisor, make time and insist on at least a semi-annual meeting to have the advisor account for everything, and back it up with financial statements.  And if you don't really understand what your financial advisor wants you to invest in, don't invest in it.  If they keep pushing for you to invest in something you don't understand, it's time to find a new one.

I hope Vince is able to make at least a financial comeback from bankruptcy.  Maybe he and Andy can grab a beer together since they do live in the same city.  

What else can we learn from these two tales of sports stardom and money to keep us on the race to financial independence?