When Should Hockey Players Begin Investing?

The NHL Entry Draft begins the journey in professional hockey for young hockey players. It’s an exciting time for these young men, and just being drafted by an NHL team is an accomplishment in its own right.

For a select group of players, their entry-level contracts will be signed and by fall they’ll be at NHL training camp. Once settled into the routine of training, it soon becomes apparent to these rookie players that their dream of playing in the NHL is a little different than they expected: they learn firsthand that professional hockey is a business, and there are a lot of financial decisions to be made.

When I dreamed of playing in the NHL, my dreams were about scoring an overtime goal to win the Stanley Cup; I wasn’t thinking about asset allocation, disability insurance options, or estate planning in Florida. Yet these are just as much a part of a hockey career as goals and penalties are.

For many players signing their first NHL contract, these business-like decisions can be overwhelming. It’s easy to postpone them, or avoid them entirely. But one of the first important decisions that cannot be delayed is determining how to best invest their earnings.

You’ve signed your NHL Entry Level Contract (ELC); when should you start investing?

When a player begins his pro career, he starts to realize that he has a relatively short career ahead of him, and a long life after hockey to prepare for. With the right guidance, a player will begin right away to learn about wealth management—and really, this will be an education over many years. Unsurprisingly, the question of timing your early investments is not simple, nor is it cookie-cutter for every player. This planning requires a deeper look into the player’s personal context, as there are a number of factors to consider before a player starts investing.

A plan is the key to success.

I like to give players an example from their summer training: wind sprints or hills may be good for their conditioning, but you’re not going to just start randomly doing reps without knowing what they’re working on and why. It’s ironic that players will recognize the importance of a training strategy, yet fail to approach investments in the same systematic, planned way.

A clear plan is crucial, and that’s why it’s the first step of our process at IP Hockey Family Office. An effective plan should be built around a player’s unique life situation so that it’s realistic and rewarding. We see the plan—what we call our Pro Gameplan—as essential, and it’s a mandatory part of our client intake process. After this deep dive of information, we create a fully customized wealth plan that’s as unique as a player’s pre-season training plan.
Invest or stay liquid? Your situation requires unique consideration.

It’s important to remember that players have very uneven cash flows through the year. They don’t get paid between April and October (other than potential playoff bonuses or signing bonuses). On the other hand, they still have living expenses such as rent, disability insurance, groceries, travel, car payments and agent fees to name a few.

There needs to be an understanding of the cash liquidity a player needs through the year. When managing cash flows, we discuss with the player how much they need and when they need it; we then build a cash flow model from there. Of course, taxes need to be taken into consideration as well. Once we understand their free cash flow, we discuss the various options for this cash flow such as debt repayment and investing.

While many players will get armchair advice from well-intentioned friends and family to drop their cash into stocks and investments as fast as possible, there’s a very real risk that the market could be down substantially when the player needs that money. No player wants to be selling stocks during an all-time low just to cover their mortgage or taxes.

How’s your career looking? It’s important to consider your unique situation.

Players need to understand that it’s okay not to invest in the stock market right away after they get their first–or even second–signing bonus. They should get some clarity on where they fit in into the NHL roster, or if they will be spending significant time in the American Hockey League (AHL). There’s obviously a big difference between making an AHL salary of $70,000 a year, versus making an NHL salary of $850,000 a year.
It’s also important to be aware of when your contract is expiring. If the player is an NHL regular and they will be a Restricted Free Agent (RFA) and likely to get a qualifying offer, then investing in the stock market is a straightforward conversation.

But the situation is more complex if a player has been bouncing between the NHL and AHL, or if there’s some question as to his position in the organization…possibly even a concern that he may not even get a qualifying offer. During these less predictable points in a hockey career, holding off on investing in the stock market is a wise and prudent move. Even if you miss out on some gains in the stock market, holding a bit more of a cash cushion “just in case” is smart, as it provides financial flexibility. This is when it’s particularly helpful to have a financial planner who’s lived the pro hockey life: only another player can fully relate to the worries you’re experiencing, and can perhaps talk you down from any knee-jerk decision-making.

The decision to invest should be made with experts by your side.

As you settle into your hockey career, there will rarely ever be a shortage of investment opportunities open to you. So the question isn’t really, “Should I invest early in my career?” but more accurately, “How much and where should I invest early in my career?” The answer to this question can change year to year or quarter to quarter, which is why it’s important to take an informed approach to creating an investment plan.

Working with an experienced wealth management firm is half the battle; and if you can, choose one with experts that also have a hockey background, so they can relate to your experiences. It’s very hard to understand the joys and pains of a hockey career without living it for yourself; having an advisor who has lived the pro hockey life means you’ll have a coach for life beyond the ice.