There’s a question one has to answer before he or she starts a business: Why would [target customer] pay for your service or product? For BrightLights, the question initially seemed simple: Why would a professional athlete pay for BrightLights’ services?
The answer became much more complicated as time went on because the connections BrightLights had to pro athletes fizzled out almost immediately. No athlete wanted to talk to BrightLights if it wasn’t first vetted by one of their gatekeepers.
So the question expanded to include other professions within the sports industry: Why would [pro athlete, agent, financial advisor, business manager, lawyer, accountant, professional team, college team, union] pay for or recommend BrightLights’ services? What was in it for them?
The selling points for each profession were hypothetical in the beginning. When you start a business, you never know your selling points will add value, but you believe they will, otherwise why would you risk so much to start a company? Over time, your hypotheses get tested and you gather evidence on what works and what does not.
As BrightLights continues to blossom and progress, we’ll write about each of these selling points and the successes and failures in creating value for our clients. We’ll start with one profession where BrightLights has proven its value: sports agents.
The Good, the Bad, and the Ugly
Sports agents, in general, do not have the best reputation. It’s a hard knock profession that will reward those who play dirty. Agents will steal other agents’ clients by bribing them. Agents will tell a player that they won’t charge them anything (typical NFL agent fee is 3% of contract) to get them signed. They’ll promise to hook players up with endorsements, they’ll bash a player’s current agent and tell them he’s stealing your money. An agent will turn a player’s buddies and family against the current agent. The deceits go on and on, and many times the players don’t realize how bad their agent is until their career’s over, the money’s gone and so is the agent.
Surviving as an agent is hard because of the capital you have to front (for training, loans, travel, lawyers) for players just to get them to their second contract where the agents really make their money. This also helps agents recoup losses from players who never made it to the second contract. Yet the agent might lose that player right before his second contract to another agent promising the world. Agents are usually weary of other agents, and the experienced ones know all the dirty laundry and can separate the good from the bad from the ugly. They’re constantly looking over their shoulder.
Not all agents are bad. Some truly care about their clients and want to see them succeed on and off the field. They are mentors to young kids and examples of success and perseverance. It’s impossible to overstate how difficult it is for pros to earn so much money at a young age when they’re impressionable and seemingly invincible. There’s a reason so many pros end up broke. If an athlete’s support system is corrupted (and hint: money corrupts) and people bleed them dry, it’s not going to end well. Good agents protect their players through the whirlwind of pro sports. Good agents want their client’s story to end well.
Agents + Player's Finances = ?
What’s been shocking to find thus far is that agents don’t really have an understanding of how their players’ money is being managed by their financial advisors and/or business managers. Agents usually have some sort of relationship with each client’s financial advisor, but it’s typically an arms-length relationship where the agents never see what’s actually going on with a player’s investments and cash management. Agents may get general updates from the advisor, but what good does that do if they can’t look under the hood?
Other agents at some of the biggest agencies want nothing to do with the athlete’s finances because it brings too much liability and no reward. While this makes sense from the agents perspective, it puts their clients - many of whom are young with little to no financial education and little to no oversight and understanding of what’s going on with their money - in the hands of a financial advisor who no one has substantially reviewed. Many agents and athletes are drawn to financial advisors who have big name clients already. Yeah, it’s great that an advisor has the highest paid linebacker in the league, but what does that linebacker know about finance? How does an athlete’s excellence in his own job equate to an advisor being so good at his?
The sports industry, like pretty much every other one, operates on word of mouth referrals. But the more and more BrightLights sees into this industry, many of these referrals for financial advisors rely solely on a facade instead of the foundation of the advisor’s investments and ability to act in the client’s best interest.
This is a problem.
Why Would An (Good) Agent Want To Use BrightLights' Services?
Two words: recruitment and retention.
Prior to this year’s NFL Draft, BrightLights had a call with the father of a football player from one of the best Division I football programs who was the highest ranked at his position and projected to go in the first two rounds. The father told BrightLights that one of the main reasons he picked a sports agency was because it offered BrightLights’ services. That was powerful to hear.
When BrightLights started less than a year ago, one hypothesis for our value to agents was that families and players being recruited would gravitate to sport agencies that offered BrightLights’ services that monitor and review a players finances. Why? Because an agent who offered BrightLights’ service not only cared about the financial well-being of his clients but understood there was a need for an independent third-party to ensure this would happen.
Right now, the world of finance in professional sports is the Wild Wild West. There is no oversight. Pro athletes don’t have the time or ability to know what’s going on with their investments and banking activity (see recent examples of Joe Smith and Chris Bosh or read BrightLights’ case studies on its blog). And please don’t point to the regulators, they don’t have the resources to tackle this issue. The history of fraud and financial ruin in pro sports makes BrightLights services invaluable. An agent recruiting a player can tell his family that he will have checks and balances over his most important asset: his money. What will they think of the agents who won’t offer this service?
BrightLights has also provided agents an additional value that was not anticipated. BrightLights is providing rookies and their families research reports on prospective financial advisors (and you won’t believe how many advisors come out of the woodwork and how many are unqualified) to vet their backgrounds for red flags and detail how their firm operates.
These reviews found a financial advisor who went bankrupt, another claiming to be a financial advisor who had no licenses to practice as a financial advisor yet stated he did on his LinkedIn profile, another advisor suspended for selling over $2 million in private investments to clients without the approval and knowledge of his firm, and so on. Despite all these red flags, these individuals are still in the financial industry recruiting pro athletes.
Providing this knowledge to a player and his family not only provides a serious value but it also strengthens the trust and bond of the relationship. BrightLights has received positive feedback from its work from both agents and families.
Keeping your client happy with your service is the main point of any client serving business. Some companies have their own “Customer Success” departments because they understand how important client satisfaction is. Many businesses fail to provide great customer service because they neglect aspects outside their realm which they can still affect positively.
With agents, many fail to ensure their client’s money is being managed appropriately. I had an agent tell me that he had been looking for someone like me for years because he had no idea whether his players’ finances were setting them up for retirement or ruin. He assumed the advisors were doing a good job, but he honestly had no idea and didn’t think his clients did either, so it scared the hell out of him.
What do you think a pro athlete would do to his agent if his financial advisor or business manager defrauded or took advantage of him? Odds are the agent loses a client.
The big agencies may tell their client, “Hey, we knew nothing about this. We totally separated ourselves from this.” The client will respond, “That’s exactly why I’m leaving.”
The small to midsize agencies may tell their client, “There’s no way I could have known this was going to happen.” The client will respond, “You introduced me to this guy and never did anything to ensure my investments were above board. You know I don’t know anything about this stuff.”
In a world where the risk of pro athletes being taken advantage of is so high, agents have to do more to protect their clients. Agents need BrightLights because no one else - not the accountant who doesn’t look for fraud or even have experience in the financial markets, not the financial advisor who everyone thinks is a great guy (hint: It’s a financial advisors’ job to be personable and likable. That does not mean he’s trustworthy), not anyone else with an interest in the athlete’s money - will provide an unbiased look into his investments and banking activity. Like most important things in our life, we need to get periodic checkups to ensure all is well.
You may have clients who don’t think they need BrightLights. If the agent is not paying for our services, and the athlete does not want to do pay, that’s fine. But he’ll remember this if he gets taken advantage of down the road and won’t place the blame on you. For those clients who use BrightLights, imagine some fraudulent or suspect behavior is found prompting your client to leave his advisor and saving him millions of dollars from future losses. This will further enhance a player’s loyalty to you because you did the right thing. He will tell others about what you did, and not only will you retain a client, but you might get some new ones too.
Why Would An (Bad) Agent Not Want To Use BrightLights' Services?
The answer is pretty simple: bad agents have something to hide that they don’t want an independent third-party identifying and telling their clients.
Bad agents direct their clients to a specific financial advisor and/or business manager in order to get a kickback for that referral. The referral isn’t disclosed and the client has no idea how much his agent may be getting to send him to some guy whose background and expertise is not the reason for the referral, but instead it’s the fact that the agent is getting paid. This under the table deal also speaks volume to the type of financial advisor you’ve now entrusted with the majority of your money.
Other agents might also be a client’s financial advisor and/or business manager. This is an incredible amount of power to wield over a client, and these agents/advisors must have an independent party ensuring a client’s finances are being handled appropriately. Bad agents who take advantage of their clients finances will not want BrightLights’ oversight.
Some agents may be directing their clients to private investments that the agent has a financial interest in and therefore has a conflict of interest in recommending to their clients. Bad agents will fail to disclose this conflict of interest or how the agent will be compensated and worried BrightLights may discover this. Good agents won’t put themselves in this position because it’s not worth the risk of losing a client if the investment fails.
Some agents have said that they don’t want to hurt their relationship with the financial advisors who advise their clients. While BrightLights conducts proactive reviews because fraud may be occurring, more of its reviews are done as a preventative measure for the client. A review is not a knock against the financial advisor or an indication red flags have been found; instead, BrightLights’ review is a check-up for the benefit of the client. In this case, what does a financial advisor have to hide?
Ultimately, the bad agents have too much to lose by associating with BrightLights even though they would be providing a service in their client’s best interest. Oh the irony.
In Due Time
As word continues to get out about BrightLights’ services and the value it provides to agents, the divide between the good agents who see the value in BrightLights and the bad agents who want nothing to do with BrightLights will only increase, shining a light on those that operate in the darkness and helping agents on the other side.