Financial Literacy Month: Manhattan West’s Justin McCurdy Discusses Educating Athlete Clients According To Their Unique Needs
The month of April brings many things – the culmination of March Madness for basketball fans, religious holidays, Earth Day and spring weather. It also brings Financial Literacy Month, a relatively recent development of the early 2000s designed to raise awareness for and promote financial literacy across the nation.
Financial Literacy Month is the perfect occasion to take a step back and consider whether your clients know as much you think they do. Often we assume clients, especially those with high incomes and net worth, understand much about investing and finance, but that assumption does not hold true for all clients.
To understand how the need for financial literacy applies to athlete clients, we spoke with Justin McCurdy, Executive Director and Financial Advisor at Manhattan West, who we named Black Financial Advisor of the Year in February as part of our WSR Pathfinder Awards – Top Black Industry Leaders of 2023.
McCurdy participates in athletics both in his professional life, where he serves clients in the sports and entertainment industries, and in his personal life through Pro Skills, a club basketball and youth mentorship program he founded.
We asked McCurdy about the financial education of athlete clients in areas specific to their needs including private equity, alternative investments and liquidity.
WSR: You often read about athletes getting involved in private equity and venture capital investments. What are some of the first things that advisors working with athletes should do to educate their clients on these asset classes?
McCurdy: Athletes tend to receive many private market investment opportunities due to their celebrity status, but they must understand that not all investments are created equal. Their advisors should clearly explain that alternative investments such as venture capital and private equity opportunities have varying degrees of risk and educate them about important data points such as investment risks, time horizons, fees, projected returns and expected capital commitments.
Additionally, athletes should understand how a private market investment will impact their liquidity and be informed about the risks incurred by the investment sponsor or general partner as well as the investment manager’s experience level, track record and whether the manager has “skin in the game.”
WSR: What do you find yourself educating your athlete clients on when it comes to private markets?
McCurdy: Transparency and education are essential to a strong relationship between an advisor and client. I educate my clients about all aspects of an investment before making a final recommendation because understanding the complex world of alternative investments can be a daunting task.
Most private clients have more familiarity with the public markets, as they’ve previously invested in equities and fixed income. I educate my clients about the difference between public and private market investing. Once they understand the various alternative asset classes, I drill into the specifics of a particular investment.
WSR: How do private markets impact clients’ budgets, cash flow and overall financial plan? What is a common challenge you find yourself working through with clients as it relates to investing in private markets?
McCurdy: A common challenge for professional athletes investing in the private markets is the need for liquidity. Many private investments have long lock-up periods, making committed capital hard to access. An advisor must evaluate their client’s cash flow and liquidity needs before recommending alternative investments.
Athletes typically have peak earnings in their 20s. It’s important that they don’t over-allocate to alternative investments in the event that they retire and need to start drawing income from their investment portfolio.
Michael Madden, Contributing Editor & Research Analyst at Wealth Solutions Report, can be reached at firstname.lastname@example.org