Financial Services Activity Components
While all financial advisors do a similar job, and very often have the exact same products and services available to their clients, the difference is in their delivery of those items. The difference in financial philosophies and the delivery of products and services is due to Financial Advisors having vastly different personal and professional backgrounds. The financial philosophy and delivery of products and services used here is the result of my personal experience as a professional athlete, my personal experience with Can/US cross border issues, and my belief that preserving wealth by avoiding financial problems should be goal #1. For my athlete clients, I have designed a financial procedure that is a theoretical approach to the handling of financial affairs. The procedure is based on the concept of avoiding potential financial problems that are common to the professional athlete situation. The procedure focuses on the financial activities relevant to Wealth Organization, Wealth Accumulation and Wealth Protection.
Wealth Organization is the activity of organizing and structuring the flow and custody of personal wealth. It involves activities related to Financial Planning and Cash Management. The designing of an appropriate financial plan for a professional athlete must correlate the unique life and income situation of an athlete to the complexities of the financial industry. Due to the potential for drastic and unexpected changes in an athlete’s life and income situation, the professional athlete’s financial plan should be general in nature and flexible. Cash Management is a two step process. The first is an accounting procedure designed to identify short term obligations that require attention and ultimately helps determine the proper amount of investable assets. The second is the design and implementation of a cash management system that directs, records and reports the flow of an athlete’s assets.
Once wealth organization has been completed, the next step in this financial procedure is wealth accumulation through investing. There are two life stages that require accumulated wealth to fund an athlete's lifestyle. The first is the Transitional Life Stage. Here the flow of income from sports is over but the athlete is still a young man who must transition into a new profession. The second is the Retirement Life Stage where the transition to a retirement lifestyle begins. The concept here is to invest a portion of athletic salary to accumulate capital that can be converted to income when the athlete reaches each stage. In each stage, an athlete may need to fund all or part of their lifestyle expenses with their own accumulated wealth. The investment philosophy being encouraged for the Transitional Stage is to invest this capital conservatively and to use investment vehicles that attempt to maximize net investment return potential by minimizing capital gains taxes and investment fees. The retirement investment philosophy being encouraged is to invest this capital for the longer term and to use investment vehicles that attempt to maximize net investment return potential through tax deferral. As well, a potential return to Canada in retirement adds another wrinkle to the selection of appropriate investment vehicles for both the Transitional and Retirement life stages.
Wealth protection is about protecting the future income of a professional athlete for himself and his family and to ensure the smooth and efficient transfer of wealth to future generations. The first component of wealth protection is insurance. You would think that with the tremendous income potential of today’s professional athletes, that their financial futures should be fairly comfortable. However, all of that is for not if the income does not get earned due to premature death or disability. The concept here is to insure income from death and disability so that in either circumstance, financial resources are available. The second component of wealth protection is estate planning. By accumulating assets through investing and insuring the receipt of income, the athlete has ensured that upon his death, there will be assets to be distributed. Proper estate planning will ensure that the distribution of wealth is done in the most streamlined and tax-efficient manner. Again, a potential return to Canada in retirement, adds another wrinkle to the estate planning philosophy.
Restrict your financial activities to these three main components of the financial world and have your affairs handled in this chronological order.