Beyond the Ice: Wealth Management for NHL Players During COVID-19

With the anticipated return of NHL hockey coming on January13th for a 56-game regular season, some semblance of normalcy is back in the hockey world, although it remains to be seen how many games are actually played in the 2021 season. While vaccines are now being distributed throughout Canada and the US, full arenas and stadiums are likely many months away. In the interim, games will be played in empty arenas and NHL league revenues will take a hit, which means that NHL professionals’ finances will also take a hit.

While players will again be adjusting to a new COVID-19 related reality on the ice, adjustments in finances off the ice are inevitable. We asked Kent Manderville, head of the Hockey Family Office at IP Private Wealth, to give his recommendations on what hockey professionals should be focused on during COVID-19 and post-COVID recovery. As both a former NHL player and a Certified Financial Planner™ (CFP), Kent offers real-world experience with the unique challenges facing pro athletes.

FINANCIAL CONSIDERATIONS FOR PLAYERS: COVID-19 EDITION

ONE: Investment Management

RISK TOLERANCE

It is time to re-evaluate the amount of risk in your portfolio, says Kent. “In February and March we saw the quickest decline in stock market history, leaving many investors shocked and panicked. The Federal Reserve and other central banks responded quickly.Massive government stimulus spending reversed the decline and major stock market indices became positive for the year, a remarkable turnaround.”

The silver lining? This rebound has allowed investors to reassess their risk tolerance and shift amounts invested in risky assets. Kent’s advice: “If you felt queasy in seeing your portfolio plummet in February and March, it may be time to scale back exposure to equities and invest in less volatile assets.”

LIQUIDITY NEEDS

Risk aside, how much of a player’s assets need to be in cash to meet your living expenses? During a ‘normal’ year, the final paycheck for the season is issued in April and, barring any playoff bonus or summer signing bonus, players don’t receive another paycheck until mid-October.

The situation has changed due to COVID. Players chose not to receive their last paycheck of last season, effectively raising their escrow payments for the season to 19.55%. Players who were under contract for the 2020-21 season and were frozen on roster at last season’s pause received 8.1% of their 2020-21 salary on October 31st.

With the coming season slated to start on January 13th, the earliest players will receive their next paycheck for 2020-21 is late-January; this is three months later than normal and may depend on games being played, no guarantee with COVID rates spiking across North America. Kent reminds us, “Players also have to contend with the fact that there is a 20% escrow for the season and another 10% of salary deferred and paid back in three equal installments in 2023-24, 2024-25 and 2025-26.”

TWO: Tax Management

With 2020 over, players will want to maximize all deductions available to them and their families.“Understand which jurisdictions you will have to file an income tax return in 2020,” says Kent. “Look at your portfolio income to make sure it’s tax efficient (looking at holding periods for stocks, for example, or if you’re eligible for the Canadian dividend tax credit). Review your tax slips with your accountant to make sure you understand the tax implications of your portfolio income.”

THREE: Risk Management

Risk Management covers a broad range of issues, and Kent provides a list of important recommendations:

• Continue to pay all your insurance premiums (including life, disability, home/content, car, umbrella, etc.) to maintain current coverage. Review all of your insurance policies and if you have determined you no longer need a certain coverage, cancel the policy.
• Visa/Immigration – related to the health insurance issue. If your contract expires on June 30, will you have to leave the country if you are a non-citizen and your visa expires?

FOUR: Estate Planning

A topic often overlooked, yet it can have a major negative impact on the family in the unlikely event of a player’s death. “The average 20- to 26-year-old does not have complicated estate planning needs, youngNHL players are a clear exception. With greater assets comes great responsibility.”

Kent’s advice:

• Check to make sure your wills and powers of attorney are up to date and valid for the jurisdiction you are currently residing. If you don’t currently have a will, it is time to get one.
• Check that all life insurance policies have primary and contingent beneficiaries named on the policies.
• Confirm all retirement or pension beneficiary designations are up to date.

FIVE: Cash Flow and Debt Management

In an unpredictable time, players need to know where cash flow goes, and how to properly leverage debt to make the most of strong cash flows. It’s crucial to take stock and make the appropriate changes where necessary. “If you don’t already, recognize how much money you need to run your household. This Should be broken down into Core Expenses and Discretionary Expenses,” says Kent. This exercise will make it clear where expenses can be cut if money is tight.

EXPENSES TO REVIEW:

CORE EXPENSES:

• shelter (rent, mortgage,property taxes, etc.)
• food, insurance premiums (life, car, disability, property)
• automobile maintenance/lease payments
• cell phones
• internet
• any other expenses that must be paid.

DISCRETIONARY:

• golf memberships
• boat maintenance expenses
• second home/cottage expenses
• other costs that can be reduced

ASK YOURSELF:

• Where are you in your career earning cycle?
• Are you still on your entry-level contract or are you at the cusp of unrestricted free agency?
• Are you a regular NHL player or someone who treats every year as their possible last year in the league?

WRAPPING IT UP:

“Everything in the NHL world has changed,” says Kent. “From no fans in the stands, living in a ‘bubble’, to how your trainer helps you get ready for games…our new reality demands adaptation to how you approach hockey.”And wealth management considerations are no different. It’s why Kent and the team at IP Hockey Family Office do what they do: work with players to get finances back on track. With the Family Office team of advisors, an athlete can be confident their finances will be on solid ground when the world returns to normal.