When the lights go out

Haunted by the legacy of stars who played hard and retired broke, today's smart players think portfolios before Porsches

Globe Investor Magazine,
September 18, 2008
By David Parkinson
Photograph by CP Photo

When the lights go out On and off the ice, Mike Modano is the consummate pro.

After 18 years in the National Hockey League, the fleet-footed Dallas Stars centre ranks as one of its greatest talents-last season, he became the highest-scoring American-born player in NHL history. Long before hitting that number, Modano learned to manage his considerable wealth as deftly as he rippled the twine. He was a model conservative investor.

But the rich and famous get a lot of business opportunities chucked their way. Five years ago-at the peak of his career, earning $8.5 million (U.S.) a season-Modano took some bad advice that cost him dearly. He estimates that he lost between $3 million and $4 million on a series of high-risk private investments in the entertainment industry. "From day one, I was really vigilant and very cautious-just play and keep putting it away," Modano recalls. "After 13 years, I was in a position where I could possibly take a couple of chances. I felt excited about it."

Modano's story is far from unique. Hockey lore brims with tales of players who were cross-checked by fiscal mismanagement-sometimes their own, sometimes courtesy of agents or advisers (see "He shoots, he scores ...," page 23). Modano, 38, says his loss taught him there's no point in rolling the dice. "Our cash flow as professional athletes doesn't last forever, and you need to just let it be and take care of itself."

Investors can learn many lessons from Modano and his peers, whose odd set of financial circumstances present a challenge to even the canniest wealth manager. NHL greenhorns may be young men holding down their first real job, buying their first car and house, and acquiring a taste for stocks and bonds. But their investment needs have much in common with those of wealthy non-athletes twice their age. For both groups, retirement is just over the horizon. The average NHL career lasts a mere five seasons, and an exceptional run rarely extends beyond 15. Hockey players need a nest egg they can draw on for 50-odd years, versus 20 for the typical retiree.

Even with league salaries averaging $1.9 million last season, putting away enough for a comfortable retirement is easier said than done. Many players still rely on an outdated support team of beer buddies, local bank managers, parents and agents to help them run their money. In most cases, these people are way out of their depth, if they have any financial background at all. Players who defer to unqualified and occasionally unscrupulous advisers-or get lured into lavish lifestyles they can't afford-risk winding up with little to show for a career of fat paycheques.

It's something that wealth manager Stewart Gavin, a former NHLer who now crafts defensive financial game plans for pro hockey players, has seen all too often. He tells a tale of one high-priced free agent he tried to land as a client last summer-only to find out the player planned to entrust his riches to his bartender, who was starting up an investing business on the side.

"For an athlete.the focus is on being the best they can be on the ice, to perform and to advance their career. A lot of times, the rest of it doesn't matter-there's no interest," Gavin says. "It's easy to go out and just buy an $80,000 or $100,000 car because they can. Is it the most prudent decision? No, probably not. But you think you're invincible, it's going to last forever, you've got a lot of money and you don't think of the implications."

Gavin's pay package wasn't quite so generous during his 13 NHL campaigns, but the 48-year-old knows what it's like to feel reckless. The Ottawa native remembers inking his first contract with the Toronto Maple Leafs at age 20-$55,000 a year, plus a $20,000 signing bonus he was itching to spend. But when Gavin ripped open that bonus cheque, he discovered to his horror that it was just $12,500 after taxes. "You started to realize, 'Jeez, I thought I had more, and it's already gone.'"

This early disappointment spawned an interest in the financial side of pro hockey that the right winger parlayed into a second career. After a serious knee injury forced him to hang up his skates in 1993, Gavin eventually found work as senior vice-president at a Bay Street wealth-management shop. Then, in 2003, he went back to hockey by launching Gavin Management Group. "I knew there was a large need," he says. "I just wanted to do something that would really protect the players and make sure they maximized their financial success while they played."

Atop the Air Canada Centre in Toronto, Gavin Management works with about 30 hockey players, from young minor-leaguers to established NHL superstars such as the Calgary Flames' Jarome Iginla and Eric Staal of the Carolina Hurricanes. Hockey players make up about 60% of the firm's clientele; the rest are high-net-worth corporate executives. Gavin and his six-member team do traditional portfolio and cash-flow management, but their services also run to lifestyle advice, insurance needs, estate planning and tax strategies.