Posted on Wednesday 16 November 2011 by Ulster Business

Best interest

Tennis player Roger Federer, who is sponsored by Nike, has estimated annual earnings of $36m

John Turley, Associate Director at law firm Tughans outlines why it is so important that our budding elite sportspeople get legal advice early in the careers

The influx of money into professional sport in recent times has created a niche market for specialist professional advice, particularly in the legal and wealth management arenas.

It is becoming increasingly important that young sportspeople seek or are directed to the best professional guidance available as early in their earning lives as possible. This is especially true given their often short careers. While golfers may be in a position to compete well into their active lives it is not unusual for a footballer or rugby player to retire before 30. For example, in December 2009 West Ham and England striker Dean Ashton was forced into retirement at the age of 26.

Professional sport has come a long way since the 1970s when our very own George Best famously quipped “I spent 90% of my money on women and drink. The rest I just wasted.” Although widely accepted as being the most talented footballer and among the highest paid of a generation, his earnings of £150 a week are equivalent to around £60,000 a year today and pale by comparison to the earnings of other professional sportsmen and women of the modern era.

A recent study of football finance for the year 2009-2010 showed Chelsea to have the highest annual wage bill in the English Premier League, paying out £174m in salaries. It is not only in professional football where potential earnings can substantially exceed those in almost any other walk of life. Tennis’ Roger Federer’s annual earnings are quoted at $36m with a further $50m in total career prize money. Home grown Rory McIlroy’s annual income from endorsements alone was, according to CNBC in June 2011, in and around the $10m mark. In Formula 1, the 2009 world champion Jenson Button was reportedly worth £43m at the age of 29.

Natural enthusiasm and excitement can mean the full implications of a young sportsperson’s initial contract are not fully considered or appreciated from the beginning. The importance of ensuring that (1) the best commercial terms possible for the sportsperson are garnered from the contract negotiations, and (2) such commercial terms are then accurately reflected in such contract should not be underestimated.

The legal arena for sportspeople and their advisers has arguably never been more varied. While the initial contract remains of paramount importance, it is often only the introduction to the minefield of legal issues that can arise in a sportsperson’s commercial life. In addition to the more run-of-the-mill legal services, sportspeople can be expected to require advice in areas relating to their sponsorship arrangements and personal endorsements and also in relation to regulatory issues. A sportsperson’s personal endorsements usually require sponsorship agreements or licensing arrangements, and grounds on which issues and disputes can arise in this context range from breach of confidence or trademarks to copyright or patent disputes.

Complex legal arrangements are being implemented day and daily to create tax efficient structures for the housing of special image rights vehicles for sportspeople.

Furthermore, it is common nowadays to see sportspeople enter the world of media as television presenters either during or following their sporting careers (however good or bad for the viewing public that may be) and such relationships should be governed by a specific contract dealing with the issues these appearances can throw up.

In my own experience, lawyers’ relationships in a particular sporting field can also add significant value to the commercial terms of a sportsperson’s contract from the off. Add to that an ability to analyse and identify the prevalent issues legal issues described above, skills in negotiating the contractual terms and accuracy in drafting the terms agreed and you can see that the role and worth of an experienced lawyer in any sportsperson’s life can be significant. Sound legal advice can both protect an individual from exploitation and prevent costly litigation in the future by putting the right legal measures in place from day one.

It is crucial that a sportsperson’s different professional advisers work closely and transparently with each other so that the best interests of the sportsperson are protected and developed. This is particularly true from a wealth management perspective. Horror stories of players receiving disastrous advice are often exchanged over club dinners. Former Scotland and Blackburn Rovers footballer Colin Hendry was declared bankrupt in June 2010 and John Barnes, the former Liverpool and England footballer, was pronounced insolvent in 2009.

The failure of sportspeople in the investment field is often considered to be the result of high-risk and often obscure investments, recommended on the basis that this particular target market is looking for something ‘exciting’ to do with their wealth.

Indeed, in a story that appeared in the Daily Mail in February of this year, Manchester United footballers Wayne Rooney and Rio Ferdinand were reported as being among 25 sports stars embroiled in a legal battle involving property investments in London, Spain and the United States in which five and six figure loans were provided. The other sports people ranged from golfers to cricketers and swimmers. My contention would always be that were a lawyer to health-check investment proposals and arrangements of this nature, it adds a further layer of due process which could identify potential irregularities before it is too late.

The more savvy sportsperson should recognise the value of good professional advice. Former Liverpool and Manchester City footballer Robbie Fowler has amassed a growing estimated fortune of £30m through primarily buy-to-let properties. Dave Whelan, the current chairman of Wigan Athletic, founded JJB Sports (now DW Sports) in 1971 when his football career was cut short by injury and has since made more than £200m.

More recently, the sporting world in general has been awash with instances where the best interests of the adviser and the sportsperson are often conflicted. As in any relationship, trust plays a big part in any affiliation between a sportsperson, be they young or old, and their lawyer. There is an argument that a lawyer is better placed than people in certain other advisory fields given the regulatory compliance and professional standard expected from them and recent trends have shown an increase in the activity of lawyers in the sporting arena. It should also stand to reason that when a sportsperson is comfortable that their affairs are in a safe pair of hands, they can concentrate their efforts on their chosen sport and performance should improve.

And improved performance for all concerned can only be in everyone’s best interest.

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