Expert: ‘Stupidity’ reason for athletes’ blown fortunes
Professional athletes make millions thanks in part to their competitive natures. Many end up losing those millions — thanks to the same competitive natures.
“They think that maybe somehow they can will their investments to work,” says Ed Butowsky, managing partner of Chapwood Capital Investment Management in Dallas. “And it doesn’t work that way.”
Warren Sapp is the latest ex-athlete to file for bankruptcy. Butowsky said he was sad but not surprised.
Sapp, who played defensive tackle for the Tampa Bay Buccaneers and Oakland Raiders in a 13-year NFL career, owes roughly $6.7 million to creditors plus back child support and alimony, according to a Chapter 7 bankruptcy filing in Fort Lauderdale. He has assets worth $6.45 million.
Other former athletes who have run into financial difficulty of late include Allen Iverson, Arantxa Sanchez Vicario and Lenny Dykstra.
“These people are going broke for three reasons,” Butowsky says. “One, they put too much money in private-equity investments. Two, they put too much in real estate. And three, they spend too much.”
Butowsky says blame in these cases falls on financial advisers who give bad advice as well as outlandish spending. “I don’t think the economy plays a role in this,” he says. “Stupidity plays a role in this.”
Chapwood Capital will soon offer athletes an online financial-distress calculator. Categories under expenses offer a hint of why things go wrong: monthly payments to friends and family, child support, agents’ salaries, discretionary spending.
“Are most athletes having trouble and struggling? Yes,” Butowsky says. “You hear about the ones who file for bankruptcy. You don’t hear about the ones who feel, ‘Hey, life is really tough.’ There’s no form for that.”
Butowsky doesn’t know particulars in Sapp’s case, but, he says, “I can almost guarantee you he put too much money in illiquid investments. . . . Don’t be surprised if you see it again next week from someone else.”