In his 14 years in the NFL, Ray Crockett earned two Super Bowl rings with the Denver Broncos as a cornerback in 1991 and 1998. Today he’s a financial advisor, specializing in insurance, real estate, and financial and tax planning. As Vice President of Operations of the Engineered Advisory family of companies, he’s giving wealth management advice to today’s athletes so they can learn from his experience.
“When I was playing, tax was a five-minute conversation,” he said. “No planning. In fact, we had a fear of taxes. You know, two things you can’t dodge—death and taxes. We didn’t know how to use our tax dollars.
“Now you have young players with tax bills of $10, $20 million a year—legacy money—and now we’re noticing that some of the wealthiest people in the country aren’t paying the kind of tax bills that we are. Why is that? Why can’t players be able to minimize their taxes too? Why can’t NFL players get the same kind of tax treatment as Fortune 500 CEOs?”
As remedial tax strategies, Ray is recommending his athlete clients consider limited liability corporations (LLCs), family offices, limited partnerships, alternative investments, and tax credits to preserve wealth.
“Athletes should be made aware of these options,” Ray said. “My job is to get players to understand them, because managers and agents don’t know about taxes.”
Ray credits his friendship with Julio Gonzalez, CEO of the Engineered Advisory family of companies (which includes Engineered Tax Services, The Growth Partnership, and ABLE), with his understanding of how tax laws and wise financial planning can directly benefit professional athletes.
Julio mentioned an example of how athletes are treated unfairly by tax laws.
“The bigger issue is that NFL players play 16-17 games a year,” Julio said. “So if they’re making $1 million dollars a year, for each game, they’re taxed 1/16 of their total annual salary—but they’re taxed according to what city and state they play in. For that 24 hours, they’re taxed according to a different jurisdiction.
“The rationale here is to make athletes pay for the stadiums. It’s unfair. No one else is being taxed that way. I’ve put together some language for Congress to consider in reshaping tax laws for athletes like Ray.”
Ray states that it’s his mission to educate players. “All athletes have short careers,” he said. “Earning time is short. Considering players can easily spend 20-30% of their total income on taxes, I believe in offering wealth-gaining opportunities. As advisors, we don’t want to take money from them; we want to give it back to them.”
Ray’s advice to today’s athletes?
“The biggest mistake is to listen to the wrong person,” he said. “If you’re a player and you look at the five people closest to you, they’re not well off financially themselves. How is someone going to tell you how to become a millionaire if they’re not a millionaire themselves? I trusted my agent and I lost millions. I invested in a hedge fund that turned into a Ponzi scheme like Bernie Madoff’s. The guy behind it lost hundreds of millions of dollars for celebrity clients and ended up taking his own life.
“The lesson? There’s no rush to invest. Two doctors I used to play golf with told me they were making a 25 percent return on this hedge fund, and they kidded me for only making five percent on my other investments. To which I say: better to keep your money and make five percent! You still have your money.”
Many male members of Ray’s family were and are Marines, and he grew up with the motto: “Prepare for war in time of peace.” By the same token, he encourages athletes to prepare for their post-sports career now while the capital is flowing.
“Before you invest in anything, know what the risks and rewards are,” he said. “We need our financial literacy. Prepare now, and save your money now. When you’re busy playing pro ball, you’re too busy to focus on your finances.”
Ray has a four-step plan he shares with clients:
- Gain knowledge – know what you can do
- Think of yourself – “I am my own business”
- Ask yourself, What’s available for me [as an investment strategy]? (Alternative investments, for example.)
- I’ll help you understand what your needs are, and we will create a plan.
Currently Ray holds both a real estate license and an insurance license, and he specializes in selling insurance to the high-net-worth market.
“For example, I showed a client how they could get a $20 million life insurance policy without paying a dime by putting up real estate as collateral,” he said. “These are the strategies I want to offer my clients. Like I said, why shouldn’t professional athletes have access to the same kind of tax-intelligent planning that Fortune 500 CEOs use every day?”