Another Athlete Investing Lesson

I don't know what it is about hockey players getting scammed all of sudden but it seems like this is a growing trend. Not too much detail yet in the article, but it goes back to a few central themes here at Badskiblog. Keep it simple. Invest in what you know and understand. Invest in people you trust. And if you don't understand what the people you trust with your money are investing in, don't let them invest in it. I spoke about these very lessons in a post a few weeks back where a bunch of other hockey players were scammed out of some money. Check it out here.

Former Detroit Red Wings star Sergei Fedorov says a man entrusted to manage his money during the past 11 years swindled him out of $43 million.

Federov, who played the last two seasons in Washington, won three Stanley Cups with the Red Wings. (Jamie Sabau / Getty Images)
In a lawsuit filed Thursday in Wayne County Circuit Court, Fedorov says Joseph Zada of Grosse Pointe Shores also broke a promise to repay him $60 million by April 20.

The suit says Zada "acting in concert with others" and "intentionally lied to Fedorov" whenever he asked about the money.

There was no answer Thursday at a number listed for Zada in Grosse Pointe Shores.

Fedorov, the 1994 NHL MVP and three-time Stanley Cup winner with the Red Wings, has signed a two-year contract with a Russian club of the Kontinental Hockey League. He has also played for Anaheim, Columbus and Washington.

It's sad this had to happen to a guy like Federov. He has been great for the game and is a class act. I just imagine what I could do with $43 million dollars. In fact, if Federov had done relatively little and sat on the sideline over the course of those 11 years stuffing his $43 million under his pillow, and then invested it in a money market fund that earned an average annual return of 4% his money would have grown to a cool $66,196,524.42. Vanguard's Prime Money Market Fund has averaged an average return of 6.27% since its inception. Although this ignores the effects of inflation it certainly beats losing $43 million over that same period. Imagine if he had merely bought a total market index fund? With all the time athletes spend on the road they could read enough personal finance and investing books to become dangerous, or at least to be able to claim responsibility for losing their own money instead of paying someone else to do it for them. Live and learn I guess.

Professional Athletes and Money

My buddy Paul actually sent me this article about how professional athletes go broke after their careers are over. It strengthen my beliefs in my definition of being rich and the importance of valuing something other than money in your life. Pauly and I have actually talked about this quite a bit since he currently is a professional athlete and has direct contact with people who are the embodiment of what this article is about. Granted hockey is less affected than the NFL, but I know there are lesser degrees of the same epidemic within the NHL and perhaps greater degrees.

The article is really long but definitely worth reading. There were a few different sections that really caught my attention.

Then there are the unnamed athletes and team personnel who pawned 400 title rings to the online reseller championship-rings.net over the past three months, a spike of about 33% from the same period last year. (A 2008 Giants Super Bowl ring was among them.) "It's mostly younger players who've been selling," says Tim Robins, the site's owner. "It's the economy. Selling these items is always embarrassing, a last resort."

I can think of nothing worse than this example of going broke as a pro athlete. Championship rings are priceless. I would rather sell a kidney than a championship ring, and just validating that something like this exists makes me sick. It's all about education. I wish some of these guys would practice the same discipline and commitment to self improvement when it comes to finances as they do on the battlegrounds of friendly strife.

"With athletes, there's an extraordinary metamorphosis of financial challenge," says agent Leigh Steinberg, who has represented the NFL's No. 1 pick a record eight times. "Coming off college scholarships, they probably haven't even learned the basics of budgeting or keeping receipts." Which then triggers two fatal mistakes: hiring the wrong people as advisers, and trusting them far too much.

I can't really speak to experiencing the financial vultures descending upon me, since by conventional definitions I am no where near what most people would consider rich. However, I think this is another area where a lot of these guys get into big trouble. "Who benefits" is a question more of these guys should ask themselves. I can only imagine all the people who are constantly approaching today's professional athlete with "opportunity" after "opportunity." I would struggle with this as well as I tend to give people the benefit of the doubt, but I think if people did a simple cost benefit analysis of what they are giving up and what they are getting they would be in a better spot. Not to mention when you are cold called about an opportunity without a prior relationship it likely is not an opportunity; its a sales call. I imagine its hard to deal with.

Sometimes though, a jock just can't shake the temptation to try to hit the jackpot. Butowsky believes that "there's something in an athlete's mentality" that drives him to swing for the fences financially—usually at his own peril. "The solution to the problem is, without a doubt, education," the adviser says. "Change won't happen until grown men start wanting to learn."


I love this quote. I love it. This isn't an athlete problem, its a human problem. Until we start taking responsibility for our lives, financially and beyond, we have no right to place blame. If these athletes spent one hour each road trip reading a book on personal finance they would likely eliminate 99% of the problems they face financially. Their ability to at least track what someone else is saying would increase dramatically, they would be a better judge of character and motives amongst their financial acquaintances, and they would have a much better ability to recognize that the opportunities that are too good to be true are, in fact, too good to be true.

All in all I think the article is great. It illustrates that income does not matter. It reaffirms the Badski definition of rich and it is empowering in the sense that it shows that your financial destiny is in your hands no matter what your W-2 reads.