Financial Advisor Red Flags – Lessons from My Personal Experience

When you sign your first professional contract, it marks a milestone and a threshold: from that point on, your passion for hockey is now officially a business.  You’re getting paid to play a game.

Part of this business is converting your income into lasting and sustainable wealth for you and your family beyond your professional sports career.  It sounds simple, but is not always an easy task considering all of the complexities surrounding income taxes, estate planning, risk management, multiple currencies, and investing to name a few challenges.

For me, I was aware of the many stories of professional athletes mismanaging their money and eventually going broke.  Obviously, I didn’t want to go down that path but I also didn’t know who to trust with my money.

Not even knowing where to start, I ended up taking the path of least resistance and hired my agent to also manage my finances.  I didn’t check if he was registered with any securities regulator or had much experience in this area; I just blindly trusted that he would help me with my money.

This arrangement lasted for a couple of years before I realized my mistakes and made better financial choices.  But I learned some important lessons along the way.

No need to rush an investment or opportunity

My experience: One day, my agent had called me up and suggested that I participate in some sort of deal/arrangement that would save money on my income taxes. Naturally, this sounded interesting.

The idea was that I would purchase shares in a company and that company would then invest in a particular project such as a mineral mine or an oil and gas well.  Eventually the company would lose money on this project and my share of those losses would be deducted from my taxable income.  Ultimately, I would pay less income tax due to the losses in this investment.

My agent had explained the overall strategy to me but I really didn’t understand it since (to me) it seemed quite complex.  In order to participate in this investment, documents were couriered to me and I was to sign and return them to him right away.  Time was of the essence, he said, and the documents should be signed and returned the same day. 

When the documents came, I opened the package and started to read them to better understand the deal.  On the first page it plainly stated that I had to be an accredited investor to participate in the deal as defined by Ontario law.  Their description of an accredited investor was clear and I did not meet the criteria since it was based on net worth and/or annual income.  Since I was just starting out in my pro hockey career, I didn’t have many assets or investments and so I didn’t make the cut to be an accredited investor.

When my agent called me to see if the documents arrived and if I had signed and returned them yet, I mentioned that I didn’t meet the definition of accredited investor.  Clearly, I couldn’t participate in the investment since I didn’t meet the accredited investor threshold.

In a very abrupt manner, my agent told me to forget about the investment and quickly got off the phone.  What was extremely important to my agent just a few minutes ago was now quickly dismissed without any further explanation.

It made me wonder what kind of due diligence my advisor had done on this investment.  It only took me a few short minutes looking at the documentation to determine that I didn’t qualify for this deal.  Didn’t he take the time to read these documents?  Did he really have my best interests at heart?  For me, it was “Strike One” against my agent.  It would come as no surprise that I left this agent early in my career and worked with someone else who I could truly trust.

Lesson learned:  When you are presented with an investment, strategy, or opportunity, don’t feel that you have to make a quick decision due to someone else’s short time frame.  Make sure to take your time to be comfortable with any proposal and get second (and even third!) opinions if that would provide a better perspective.  Better to pass up on an opportunity, even if it ends up being successful, then rush into something you don’t really understand.

A trustworthy advisor with your financial wellbeing at heart will understand your caution, and will provide you with options that fit your risk appetite; he should also, obviously, be well-versed on what he is presenting to you.

Warren Buffet has expressed this very well in this passage:

“I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.”

“Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

Take your time to understand what you do with your money.  Whether it’s spending, saving, or investing, you’ve worked hard to get and stay where you are so take the time to make smart decisions with your wealth.

What is the IP Hockey Family Office?

IP Hockey Family office is a wealth management firm devoted to the career and financial wellbeing of hockey professionals. Our ‘family office’ model is designed to get all your advisors working collaboratively so that you end up with one clear gameplan. Our director, former NHLer Kent Manderville, ensures that each plan takes into account the unique nature of your hockey career and earnings, ensuring that your personal, athletic, and post-hockey goals are included in your wealth planning process. Learn more here.

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Kent Manderville, CFA®, CFP®

Kent is Director of IP Private Wealth hockey professional brand, the IP Hockey Family Office. Kent played over 700 games in the NHL (National Hockey League) and has personal experience with the complexity of a professional athlete’s finances. Kent experienced firsthand the importance of comprehensive financial planning and wealth management, and for the second phase of his career joined IP Private Wealth to help other athletes optimize their finances using the IP 360° process.Kent enjoys most of all, spending quality time with his family. However; he can’t shed his love for hockey and can be found tying up his skates every opportunity to play with the Ottawa Senators Alumni. A graduate of Cornell University, Kent also holds the designation of Certified Financial Planner; he has also graduated all 3 exams for the Chartered Financial Analyst (CFA) designation.