Why do footballers keep scoring own goals with their finances?

Last week, a professional footballer was arrested on suspicion of tax fraud providing the latest in string of negative headlines about the financial affairs of professional sports men and women. Over the past year, an increasing number of players and ex-footballers have been identified as having been involved in aggressive tax planning schemes and in some cases this has led to huge fines and tax demands... For those who earn an incredibly large sum of money each week, where is it all going wrong?

Adam Osper, a financial planner specialising in advising sports professionals at leading wealth manager Tilney, looks at the financial life of professional footballers and highlights why sound financial planning is vital for these millionaires.

“The closure of the Premier League transfer deadline window this week is yet another reminder of the astonishing sums of money involved in football, with Premier League Clubs spending a record £430 million on player transfers during January. The earnings that can be commanded by Premiership players are also huge and following the latest Sky broadcasting deal, we are talking about monopoly money flying around. However, what makes them different from most of our other clients is that they come into wealth at a very young age, and have a (relatively) short career. This means that careful financial planning is needed to ensure the money doesn’t run out as around 60% of former professional football players are estimated to end up bankrupt once their playing careers are over.

“A high income leads to big tax bills and so it is all too easy to see why a young player, perhaps with limited financial experience might get tempted by the allure of aggressive, and usually very complex, tax planning. It’s also very hard now to do any financial planning to get tax relief from normal HMRC approved tax wrappers especially with the introduction of the tapered annual pension allowance for high earners which will effectively limit contributions to top class players to just £10k pa – a sum that is barely beer money in the overall context of their affairs.

“Often alternative routes are sought out and generally not by the footballer themselves. There is a myth about footballers that because they earn a lot, have big houses, drive nice cars and have expensive clothes and jewellery they like taking risk with their money. The reality couldn’t be more opposite.

“Most would rather be able to see their money in the bank even if it is earning no interest rather than invest the money with a possible downside risk. Planners need to spend a lot of time educating them on how investing monies work and hold their hand to get them used to the process and how it works.

“My advice to footballers would be:

Keep it simple.

“Pay down your mortgage, own properties in rentable locations or where you plan to live post retirement and build up a pot of money in mainstream investments to give you financial independence when you retire. You only have 5-15 years to try and live for a further 50-60.

Stay away from complicated structures

“If you don’t understand what your adviser or accountant is telling you, how can you know what you’re letting yourself in for? I have seen footballers who had agreed to invest in complex schemes promising to help them pay less tax without them fully understanding an investigation by the tax authorities might occur. The big problem here is that investigations can come several years later when they are at the end of their career and with advance payment notifications now in play, huge sums might have to be repaid for something that happened years ago that they can’t really remember about and when they may have either spent their cash or it's tied it up in illiquid assets.

Get recommendations for a good adviser who is experienced in working with footballers.

“Often they put trust in the wrong people and sadly people look to take advantage. Some people may have limited sympathy as the footballers earn millions, but the reality is they are young people trusting professional advisers to give them good advice.

Never get involved in get rich quick schemes

“Anything that sounds too good to be true, probably is. You don’t need to try for 10% a year returns – solid stable planning will give you and your family an incredible life.

“I always make it known early in the relationship to run anything by me no matter what it is, if it’s good I will tell you if it’s not I will also tell you. Keep things simple so you don’t need to take risk with your money as you earn enough. Enjoy your life, but always have one eye on the future as your career may be over soon.”

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Important Information

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. This article is not advice to invest or to use our services. If you are in doubt as to the suitability of an investment please contact one of our advisers.