This publication interviewed a senior wealth planning consultant at Lombard International about sports and wealth management.
Wealth management is now as much a part of an athlete’s career choice as the team they play for, especially as wealth in sports has increased significantly over the past decade. According to reports, Lionel Messi is currently the highest paid football player. world player – he earned $111 million per year in the Spanish club Barcelona and through sponsorship deals. With great wealth at their disposal, specialist planners and bankers have become an essential part of a footballer’s life to manage their affairs.
Recently, this publication reportedthat after around 12 months of tax planning difficulties in Spain, footballer Cristiano Ronaldo was helped in his decision to join Italian club Juventus. Indeed, a new tax law in Italy allows taxpayers who move to this country to pay as little as €100,000 ($116,000) in taxes on income earned outside the country. WealthBriefing has regularly reportedon the crackdown on tax evasion linked to image rights in Spain involving a host of big names from the world of football, including Messi and Xabi Alonso.
Ronaldo is not the only player to think about the financial problems in Spain when making his footballing decisions. Lombard International recently supported a goalkeeper leaving the UK for Spain, who was experiencing international mobility difficulties and needed professional advice. The life insurance contract he has selected must comply with Spanish tax rules from the moment it is created. However, after discussions, the player decided to leave the United Kingdom for Italy. The objective remained the same for the client: they wanted to ensure that their UK life insurance policy would be compliant in Italy. This publication interviewed Nicolas Liaigre, senior wealth planning consultant at
Lombard Internationalon sport and wealth management as well as the Italian case study.
To what extent has wealth planning become a factor in a footballer’s career decisions?
Wealth planning has never been more important in a footballer’s career decisions than it is today. Some time ago I was reading a
FT article on the subject, entitled “A new breed of footballers” comparing today’s football stars and their approach to their careers and lives to the stars of 30 years ago. Totally separate worlds.
Today’s footballers play in a very mature sector where they grow up surrounded by specialists and experts who help them in all aspects of their career. Many players are used to the idea of getting advice from experts and have learned from them as well. The same article referred to the example of Mathieu Flamini, the French footballer, who is about to become the first billionaire footballer, not through income earned from playing football, but by co-founding a biotechnology company that helps fight the environment. Shame. He acknowledges having learned from mentors around him who go well beyond the field.
The footballers who played professionally twenty years ago and the players today are polar opposites. Today’s footballers are playing in a mature industry and learning to consider key elements in all aspects of their lives, including financial considerations.
Is sports and wealth planning becoming a growing sector that needs more attention? What more needs to be done for wealthy footballers?
Absolutely. There are many elements that make wealth planning in sport extremely important. These include short professional careers, the fact that athletes are very mobile internationally and have cross-border needs, a lifestyle to maintain, health coverage expenses which become more expensive as they are getting old. Additionally, not all athletes in the “wealth creator” population will necessarily have received financial education and so working with an advisor is crucial.
Football has become an established industry on an international scale and there is a need to take a more integrated approach to wealth planning for its players. Financial education must be recognized as a crucial part of a footballer’s well-being.
What plans should be put in place to help a footballer facing tax complications linked to cross-border wealth?
The same goes for all other “wealth creators”, mobile on an international scale. Taking the right approach is essential, and a long-term view is always more prudent than a short-term solution.
Footballers will move on average two to three times during their career and rarely know where they will go next. At the end of their career, they can retire in their home country or elsewhere. That’s a lot of traveling. As they accumulate wealth over the course of their careers, there are many solutions that could work perfectly in a given time period, in a given country. The challenge is that as they move to the next country, these structures could become unnecessary and too problematic as new legal and tax challenges arise. This can happen both locally in the new country of residence and internationally, as some assets may be stuck in the given structure and might not be portable. It is therefore essential to consider the “mobility” element from the start and plan for the long term using compliant and cross-border solutions by design.
What should footballers consider financially when moving to a football club?
As with any professional moving to a new company, accepting an advantageous employment contract is the key to success. All financial terms must be considered, including signing bonuses, base salary, expenses and additional bonuses. A key element specific to athletes in general and footballers in particular is image rights.
Image rights are a recurring subject of discussion during contract negotiations. Traditionally, clubs seek the exclusive right to control how the athlete will appear in media and advertising. It was in the past, before Beckham. Today, most players know the importance of this element in their finances, and how lucrative it can be. So they don’t just give them away and generally most contracts will find a compromise that gives the club and the player some of those rights. These rights are usually managed by companies created solely for this purpose and in a cross-border scenario it is essential that these companies are properly established to manage any possible international relocations that the footballer may have during their career.
Is tax crackdown becoming a norm in Europe – and are Spain and the UK pioneering a continental campaign against image rights and tax structures, or is it that this campaign will die?
It is less a repression than the establishment of new tax codes, more relevant to the world in which we live. It is now, more than ever, a question of intentions and goals.
Creating an image rights management company is crucial to ensure the proper management of these rights for a successful footballer. This is the main intention and it should remain so. If the main objective is tax avoidance, this inherently cannot work, because there is an alignment of rules and regulations between countries, and with the upcoming “automatic exchange of information” regime, international sharing data will soon become the norm.
Regarding a potential continental campaign against image rights and tax structures, launched by Spain or the United Kingdom, I think what we are seeing is only the tip of the iceberg. Over the past five years, most European countries have made significant efforts to combat tax evasion, in many sectors beyond sport. The episodes involving Google, Amazon and Starbucks are an example.
Regarding the case study, how did you help the footballer? Have you spoken to his whole family? What plan did you give him? Did what you said help him make his decision?
The client had recently moved to the UK and was considered resident non-domiciled (RND), a special status in the UK which gives you the ability to choose your tax regime. Non-DOMs generally opt for the remittance basis, which offers tax advantages but also creates administrative problems and complexity (account segregation, protection of equity). Life insurance is the ideal tool for such questions. We had various conversations with the IFA and the client’s accountant to understand the needs of the client and their family. We then wrote a note detailing the schedule we had considered, and this was reviewed by the client’s father.
A meeting then took place with the player and his parents, in the presence of eight different advisors who presented their expertise and solutions. We thought it was important that even though parents were involved in the decision-making process, the player needed to understand their own responsibility in their financial decisions. The main benefits of our solution for the client were that it is recognized by tax authorities, portable across major European jurisdictions, flexible in terms of management and transparent regarding fees and people involved in the contract.
How did you come into contact with the footballer?
We had an existing relationship with the client and their IFA since we had worked with both of them in Belgium. The IFA contacted us when the client moved to the UK, as they knew we had the technical expertise and experience in this market to develop the most effective solution for the client.
