Bad advice, fraudsters and sketchy investment pitches pose real threats to inexperienced investors.
On my video podcast, “Dollars & Sense With Michelle Singletary,” my guest, Lauryn Williams, shared some wild stories about the money mistakes she made early in her athletic career that led her to become a certified financial planner.
Williams is a three-time Olympic medalist and the first American woman to win medals in both the Summer and Winter Olympics, in 2004, 2012 and 2014. As a champion track runner and bobsledder, she earned money from endorsements and from competing in and winning races, but a string of bad financial decisions initially kept her from preserving and growing her wealth. Part of this came from trusting bad financial advisers.
“I ended up in the hands of somebody who didn’t teach me a whole lot about financial literacy,” Williams said.
In her early 20s, Williams was making more than $200,000 a year. That’s a lot of money in the hands of a young person with no plan, and a story we hear far too often. Athletes are frequently targeted by unscrupulous financial advisers and business partners, given their limited knowledge of managing their wealth.
After cycling through two inattentive advisers, Williams tried to invest on her own. It did not go well.
Early in her professional athletic career, she fell for a pitch from an investment promoter who promised he could double her money in a month by investing it in an overseas venture.
“I should have asked a lot more questions,” Williams said. “I should have gotten all the information in writing.”
She lost the $150,000 she had handed over to the promoter, money she had set aside for taxes. She ended up taking out a second mortgage on her home to pay her tax bill.
She watched other professional athletes lose money as well. One adviser persuaded a group of NFL players to invest in a casino.
“The casino never opened, and they all lost 100 percent of their money,” Williams said.
These incidents were part of what motivated Williams to take control of her own money. Realizing she could do a better job than the advisers she had hired, she became a CFP and launched her own firm, Worth Winning, in her early 30s.
“I was in Switzerland talking to a fellow athlete. … He’s probably earned at least double, if not triple, what I’ve earned during his career,” she told me. “But he had no clue what to do with his finances. And I’m like, this is the kind of person that I would want to be able to help.”
Putting your faith and money in a financial planner’s hands can be scary, but a good one can help you build wealth. That’s why it’s important to do your homework.
“I do also wish that I had some proper guidance along the way so I didn’t have to make such expensive mistakes,” Williams reflected.
If you’re going to hire a planner, interview a few. Look for a fee-only fiduciary, meaning they are legally required to put your best interests first. If they aren’t fee-only, ask how they are compensated. A good adviser should help you get a clear picture of your financial situation, teach you along the way and lay a solid foundation for future investment, tax, estate planning and insurance decisions.
You do not have to become your own certified financial planner, like Williams. But you should have confidence that the professional you hire is genuinely working in your best interest.
“I didn’t know that I was financially illiterate,” Williams said. “I knew I didn’t know a lot about money, but I didn’t know how dangerous it was to not have somebody who was going to guide me, who was not focused on my literacy.”
Follow Michelle’s financial advice show, “Dollars & Sense With Michelle Singletary,” on Apple Podcasts, Spotify, YouTube or wherever you get your podcasts. Want Michelle to answer your money question on the show? Email [email protected].
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