Ending our footballers’ financial misfortune
A comprehensive financial advisory system for discretionary savings is needed to solve the problem of SA professional footballers retiring broke
In the aftermath of last weekend’s Uefa Champions League final a forlorn Sergio Aguero bid adieu to his decade-long spell at a club where he had become a legend. Yet his lack of silverware at the highest echelon of European football is merely a symbolic defeat, especially when one considers the amount of silver in his pocket. With a reported salary of £1m (R19.5m) per month, the bitter taste of defeat is unlikely to last long.
The same cannot be said for Aguero’s footballing peers outside the pristine fields of the top European leagues. The class distinction becomes clear when one considers the financial chasm that separates international players compared with SA players.
Using data from the Global Sports Salaries Survey, the average English Premier League player earned about R3.6m a month in 2018; in the same year the average Premier Soccer League (PSL) player earned R74,000 per month. This is the difference between upper class and middle class; wealthy and well-to-do.
It would be no more than trivia were it not for the lifestyle behaviours of many top athletes, which results in them retiring penniless, with nothing to show for their years of toil except a few medals and memories. The question is why so many SA professional footballers end up in such a lamentable position.
The salient point here is the very short duration of a professional athlete’s career. Most players who reach the top tier league do so around age 20 (after having journeyed through youth teams and reserve teams); moreover, they will tend to retire in their mid-30s. Compare this brief 15-year career to the typical 40-year spell of a professional employee, who may begin working around 25 and retire at 65. The message is simple: 15 years’ earning power is much less than 40.
For the top global athletes, the short duration of their careers is mitigated by the enormous sums they earn — taking home R3.6m per month for 15 years should enable you to retire comfortably at 35 in most cases. This, unfortunately, doesn’t apply to the “merely” middle-class salaries earned by most local footballers. It would require a Herculean effort for the average doctor, lawyer or banker to retire at age 40, after just 15 years of working. Yet the average PSL player is expected to do just that, sans any Herculean effort vis-à-vis their personal finances.
This 15-year career also happens to coincide with the early years of young adulthood and all the adventures that come with it. SA has an especially low savings rate in general; for footballers, this is worsened by peer pressure, fame and financial commitments to extended families. It is a wonder that the existential problem of a complete loss of income on retirement isn’t more urgently addressed. It would be difficult to think of a group of workers more in need of compulsory savings than footballers.
Given these issues, it is clearly not enough to expect that footballers will create sufficient discretionary savings of their own volition. What is needed to solve this problem is a comprehensive retirement fund for professional players, and a comprehensive financial advisory system for discretionary savings.
The critical step for implementing a PSL Players Retirement Fund (PPRF) is to have a mandatory retirement contribution in place. The contribution should be large and it should be matched by the clubs. For example, a 20% player contribution matched by a further 20% by the club, resulting in 40% of the pretax salary going into a retirement fund. Given our consumption-orientated culture, some may balk at such a contribution. But bear in mind that global best practice is for professional athletes to save 60% to 80% of their salary.
Once a figure has been agreed a fund can be set up, with trustees from each club and a professional team to advise on asset allocation and fund manager selection. The fund could fall under a larger umbrella fund structure to save costs, given that the number of beneficiaries would be relatively small. Most importantly, withdrawals from the fund should be limited as much as possible. A pension fund structure, as opposed to a provident fund, would limit withdrawals on retirement in favour of a living annuity, which provides further sustainability for the young 35-year-old retiree.
In terms of the second part of the solution, there already exists a model that can be implemented. The American National Football League publishes a list of accredited financial advisers that it encourages players to use for their financial affairs. Such a system can be taken further by creating a mandatory list of advisers for PSL players to choose from. Such a list would preclude the all-too-common pitfall of individuals seeking financial advice from people who are not best suited to provide advice.
In many cases, it is agents with little financial training who provide players with advice on their affairs; worse still, it could even be charlatans promising unrealistic investment returns. The minimum requirements for advisers wishing to appear on the list would be having the requisite Financial Sector Conduct Authority qualifications, as well as designations such as certified financial planner (CFP) or chartered financial analyst (CFA). Moreover, the adviser should be working for an accredited financial service provider.
The purpose of these advisers would be to provide players with a goals-based approach to achieving their financial objectives. This would cover the gamut, including personal budgeting; cash flow, debt and debit-order management; insurance cover; tax advice; and estate planning. Such an approach would help players better understand their financial constraints and risk tolerance and help them to achieve their long-term goals.
What would the outcome of all this be? Some assumptions are required here: if we take our average player earning R80,000 per month today (adjusted by 4% inflation from the 2018 figure), and assume a 40% contribution, this leads to an annual pension fund contribution of R384,000. If we assume a long-term investment return of 15% per annum and an annual salary increase of 5%, then after 15 years — the final year before retirement — our player is earning R158,000 per month, contributing R760,000 per annum and has accumulated R26m in savings.
At this point the second stage of the player’s financial life plan would kick in. Based on their goals, the player could withdraw about R9m in cash to purchase a home, fund a business idea, set up a family trust and so on. The balance of the portfolio could be invested in high yielding assets to provide ongoing income, or used to purchase a living annuity. In reality, the player would begin with a salary below the R80,000 average but should end with a salary that is at least close to the inflation-adjusted average.
The power of a high savings rate and compound interest could transform the fortunes of professional footballers significantly. Such a system would prevent these societal role models from losing their social standing post-retirement; it would return their dignity; empower them and their families; and it would create important advocates for long-term savings and investments within the broader SA community.
• Mashigo is a portfolio manager at Sanlam Private Wealth and a director of the CFA Society SA. He writes in his personal capacity.
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