My favorite story this week comes from the NY Times on the money whisperer to the NBA’s super-rich elite.
Joe McLean is a former Arizona college basketball player who never quite made it in the pros. Once his playing career was over he began managing money for the players who did make it.
And not just any players but those signing some of the biggest contracts — Klay Thompson, Aaron Gordon, Nikola Vucevic along with a handful of pros from the NFL, MLB, and PGA.
The contracts for the 50 athletes on his client roster are worth nearly $2 billion.
He seems like a guy who is doing right for his clients by looking out for their financial well-being in a number of ways.1 It’s nice to read a story about pro athletes and their money that isn’t about getting swindled or blowing through it all.
None of us will ever have to worry about how to make our nine-figure contract last a lifetime but here are a few lessons from this story that apply more broadly to business and money management:
The best service-related businesses can be selective about their clients. One of the keys to a happy business and a happy life outside of your business is the ability to work only with those clients you want to work with.
McLean has a wonderful rule of thumb for weeding out those he will and won’t work with:
This is not to say Mr. McLean’s clients are profligate. To retain his services, each player must agree to put aside at least 60 percent of every dollar he earns, with the rate climbing to 80 percent if he’s fortunate enough to land a long-term deal. Or they’re gone. Mr. McLean has fired two clients for ignoring the policy. He hates it, because “in my mind it means I’m giving up on them,” he said. “But they didn’t buy into it.”
I love this idea because right off the bat both sides understand how this relationship will work. The clients know the advisor is looking out for their long-term financial future and the advisor knows the client is looking out for their own long-term future.
This is a brilliant strategy.
It makes sense to shop around and negotiate your purchases. Sellers of products and services had the upper hand when it came to information and pricing power before we all had little supercomputers in our pockets.
Now you’d be naive if you didn’t shop around a little just to see what else the market has to offer for those areas where you’ll be spending a decent or recurring chunk of change.
Gordon, who plays for the Orlando Magic, didn’t know how much to charge for lawn care:
“The first couple people that came to the property were sending these invoices trying to charge $4,000 to $5,000 a week to cut grass and do some power washing,” Mr. McLean said. Mr. Gordon has a big house, but not that big — it should have cost around $500. “So I’ve got to go back to Orlando and get people that we trust on the property.”
Five Gs to mow the lawn sounds a bit excessive.
This is a first world problem but it certainly makes sense to get a handful of different quotes when it comes to things like services around the house, house or car insurance, appliances, electronics, and banking services.
It also doesn’t hurt to ask if it’s possible to get a better deal or lower price. The worst that can happen is they tell you no.
There’s a difference between managing money and managing wealth. The nuts and bolts of portfolio management are always important for those looking to build or retain wealth but managing how that money is being used can be far more impactful on someone’s life.
I like the distinction Devin Gordon, the author of this story, makes in his piece:
Managing basketball players’ money is not the same thing as managing their wealth. It’s Mr. McLean’s job to protect his clients’ assets no matter what form they take. Their cars need customizing. Their houses need renovating. Their private bowling alleys need polishing. Their koi ponds — filled with 30 creatures, each worth around $5,000 — need a specific kind of emergency netting installed when the team is on the road and there’s a hurricane bearing down.
Normal people don’t have to worry about koi ponds and private bowling alleys but how you spend your money helps guide so many other decisions in the financial and investment planning process that it’s an important first step.
Managing wealth in the markets is not easy but managing money in your real life can be far more complicated.
None of us will be hiring our own personal concierge to oversee our spending decisions anytime soon like these professional athletes.
But before you think about managing your wealth in markets, it makes sense to have a handle on how you manage your money outside of the markets.
Read the entire story for more on McLean’s background:
Meet the Money Whisperer to the Super-Rich NBA Elite
Your Household CFO
1I hope he’s not one of those guys that earn the players’ trust and then in five years we learn he was siphoning cash off the top for himself the whole time. I have no reason to believe this will happen. Just had to throw that in there as a disclaimer because you never know with these things.