World Football Summit speaks exclusively with Ben Smith, chartered accountant and partner at FLM, a forward-thinking wealth management service based in London, about the need for financial education in football. This interview features as part of the latest edition of WFS Digest, our new insider’s guide to the latest and most relevant thoughts and practises from within the football industry. You can subscribe to WFS Digest HERE.
Ben Smith is a chartered accountant and partner at FLM, a forward-thinking wealth management service based in London, who has taken a turn towards sports in the last three years. With 20 years of managing assets worth €1.65 billion, their team now applies its financial expertise to players with a two-pronged approach: education and wealth management. The reason? “In football, you have 50 or 60 years of retirement, and this causes huge problems when it comes to providing yourself with income,” says Smith. “Of course, many people turn to other activities, and our message to them is: wouldn’t it be nice to do those things out of choice, as opposed to necessity?”
FLM are visiting academies throughout the UK to deliver educational seminars on basic financial concepts, while also underlining what represents good financial practice and the importance of wealth management to educate the next generation of sportspeople. They have so far delivered sessions to teams including: Wolves, QPR, Huddersfield and Chelsea Women, and work with numerous high-profile athletes across various disciplines. As Smith puts it: “In the world of football, because things come at such a young age and there is a sort of glitzy culture where people drive really nice cars, it’s even easier to get carried away…”
“Player care is a new subject, as earnings in football have only really gone bananas during the last 20 years”
World Football Summit: Many fans would be astonished if they knew how many former football players and athletes suffer economic hardship. How did you find your way into player care and education?
Ben Smith: For us, it’s about recognising that any athlete is ultimately time poor, and they won’t have time to focus on their money and finances as much as they’d like. But of course, they’re the ones who are in control, so unless we educate people from a young age and open their eyes to how they can manage their money, and the sort of habits they should be getting into, it’s all going to go wrong. Our mission is to educate from a young age and give those athletes the tools to make some really sensible decisions throughout their career.
Every time we speak to a club or an athlete or a group of athletes, our first message is: ‘You’re in control’. No one really likes being told what to do, and in order to help someone we’ve got to get them on side, and believing why they should save each month or set up different investments or buy a house and pay it off by the time they finish playing. It’s very easy for us to tell someone what to do, but unless they’ve bought into that and recognise why it’s so important, you’re always going to struggle to make them take good decisions.
WFS: Is the fact that 60% of athletes encounter economic difficulties after retirement an exaggeration?
Smith: It varies from sport to sport, that’s key. If we focus just on football, statistics say 60% of players run out of money after five years of stopping playing. And again, it’s not surprising for a number of reasons: one, obviously, is that when you earn a lot of money from a young age it’s a very dangerous thing to happen. How many of us made big financial decisions in our twenties? In football, you’re not going to earn those amounts after age 35. So that period you have to make a real difference to your finances is shorter – 15 years on average, compared to 40-45 in more traditional careers – but also it comes at the start of your life. And when this happens, you’re not necessarily in a position where you’ve got as much fear, you feel invincible and you think it’s going to last forever.
That means it’s very easy to fall into really nasty habits, like always spending more, always buying a nicer car, buying a nicer holiday, or whatever. You become what we call a ‘lifestyle creep’, which basically means that every time you get a new contract you upscale your lifestyle… you never focus on the things that are really important, like investing, or paying down a mortgage, or not buying five different cars. So, if you can catch athletes at a young age, let’s say when they’ve signed their first pro contract, it’s easier. If you tell them ‘let’s start just investing 200 pounds per month’, even if they’re an academy player and don’t earn much, if you can just get them to do something, then when they sign their next contract, probably bigger, we can say: why don’t you save 50% of this next pay rise?
WFS: So you don’t have to be Paul Gascoigne or George Best to suffer an economic breakdown…
Smith: Certainly not. There are a million things that can go wrong, it’s not just getting addicted to drugs or alcohol. It could be getting addicted to gambling, or always spending too much and trying to keep up with your peers in terms of the car that you drive or the clothes you buy. Every time you speak to players in clubs, the amount these guys spend on things like trainers or designer clothes is absolutely insane. There are many reasons why someone can fall into a trap – one of them is really poor investment advice. Maybe they went for a cryptocurrency that collapsed to zero, didn’t diversify and spread their risk trough lots of different asset classes. And knowledge is power, right? Having the education from a young age is going to increase the chance they make good decisions. And, definitely, having excellent people around you. We see athletes who are very level-headed and do things sensibly, and they always talk about their team. They have good people around them: an agent, a financial advisor, a lawyer, a manager… all these things are extremely important.
WFS: You look to work with clubs, not only individual players.
Smith: One of our biggest beliefs is that if we work with academies across the country, and take them through a money education programme, let’s say from under-18 to under-23, for example, we can really get a head start. We try to set up very interactive sessions, whether it’s making an investment or not buying so many pairs of trainers. Just getting them thinking about these things. And I think previously this didn’t exist; what happened is that someone started earning money, a friend recommended a wealth manager, and it was down to the luck of the draw. Clubs are now really waking up to player care and providing fantastic support. Many don’t make it and fall off the academy, but clubs are getting much better at making sure they find new careers for them or get them into a different sector. Player care is on everyone’s lips at the moment, particularly in the UK.
The big thing for us is making sure that we get there early and speak to these different clubs about what we can do, and not just present one thing at a time. We present a programme which we take athletes through, have sessions, share good and bad stories, developing habits, explaining compound interest, how to invest in portfolios, in property… it’s a labour-intensive exercise which requires commitment within the club, because schedules are very tight. We’re always keen to engage with the club’s player-care teams and make sure they understand the importance of this before we start cracking. Our team’s young and dynamic, with advisors in their late twenties who hopefully can resonate with athletes.
WFS: This is a novelty in the world of football…
Smith: It’s a relatively new subject, as earnings in football have only really gone bananas during the last 20-30 years. So, we haven’t got lots of data to compare in a hundred years life, for example. But there are a lot of good initiatives out there right now, people who help athletes buying properties for them and renting them for income, people who coach them into different careers. However, changing a deeply rooted culture doesn’t happen overnight.
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WFS: What’s your take about the role of agents, whose regulation FIFA is trying to change this year?
Smith: The world of financial advice is extremely regulated. To do my job, I have to pass a number of exams, on an ongoing basis; you have to report everything you do and fit certain guidelines. Regulation should be very important to become an agent, increasing accountability is super important. And I think that because transfer fees have gone bananas in the last 20 years, it does take a bit of time to catch up. I believe FIFA’s making the right noise about that. The agents that I meet are really great people who only have the best interests at heart, but again, there’s a huge amount of skills they need to be able to give that player the best opportunities.
For example, if they’re not concentrating on the wellbeing of their players, and helping meet great professionals to advise them, it’s easy for them to fall off the wagon and maybe get to a stage where they’re not managing their life as effectively as they can. I’d like to see a qualification to become an agent, but of course the older professionals don’t want to go through all of that; it’s tricky. But newer people who come into the industry should have a standard of education and qualification. It’s a potentially high-paid industry, so doing some exams at the start is only fair, I would say, and should lead to better outcomes for the players. The agents are so trusted and the player often trusts his or her agent explicitly, which is great, but if there’s someone without the right intentions, it’s fairly easy for mistakes to happen.
WFS: How are cryptocurrencies changing this activity?
Smith: That’s a good question because everyone these days wants to be a millionaire yesterday. Life moves at such a quick pace, we get information from so many different sources, and so quickly, that if someone makes a million pounds in cryptocurrencies in a day, most people hear about it. How does it affect sport? We’re not talking only about cryptocurrencies, there’s also what we call the gamification of investing. Over the past few years, we’ve had companies like GameStop, whose share prices went mental in a matter of weeks. And investment is much more accessible than 20 years ago, you can get into your phone and do things immediately, without people like me. That’s very good in a way, because it’s more accessible, but also very dangerous. Every time we talk to athletes, we get questions about cryptocurrencies, specifically; it’s one of the first questions on people’s lips. And they are not regulated, so everyone in my position cannot give advice about this.
Everyone who invests into cryptocurrencies needs to realise that it’s a super high-risk strategy, no one really knows the long-term future. So, we always advise them to spend only a small portion of their wealth, money that they are ultimately happy to lose. Your regular savings and investments should be in secure, long-term assets. It will be exposed to risks, of course, but you won’t lose it overnight.
WFS: What about NFTs, which seem to be at the centre of the industry’s post-pandemic evolution?
Smith: It’s certainly fair to say that a lot of people are fed up with the traditional system and after COVID this is clearer. People are looking for new ways to invest, which are not related to traditional governments or banks. People want to be able to do these things. And in sports NFTs are so prevalent, athletes are going to hear about it all the time, but if they are sensible and control the risk, the rule of thumb is spreading your risk across different investments. I think people sometimes lose sight of that, and when they see a gain of 1000% overnight, they want to put all their money there. People need to understand that anyone who’s very wealthy will have stock portfolios, bond portfolios, and spread their risk across many properties. So, whatever happens, they will still have income.
This interview features as part of the latest edition of WFS Digest, our new insider’s guide to the latest and most relevant thoughts and practises from within the football industry. You can subscribe to WFS Digest HERE.