200 young hockey players are about to get drafted by the
NHL. Are they really set for life?
RBC offers 10 financial planning tips for drafted and professional
TORONTO, June 25, 2009 — On June 26 and 27,
just over 200 young hockey players will be drafted to the
NHL at the 2009 Entry Draft. RBC's Sports Professional Program
offers 10 tips for newly drafted players to help make sure
their early athletic success translates into long-term financial
"Getting drafted and becoming a professional player
is a dramatic change for an 18-year-old, as they suddenly
deal with significantly more money but also much higher expectations
for spending. There is a lot of uncertainty in an athletic
career, so professionals need to start financial planning
as soon as they are drafted," said Darwin Schandor, regional
vice-president, Sports Professionals Program, RBC Private
An understanding of financial planning is extremely important
for professional athletes. Within two years of retirement,
78 per cent of former NFL players have gone bankrupt or are
under financial stress while an estimated 60 per cent of former
NBA players are broke within five years of retirement, according
to reports quoted in the March 23, 2009 issue of Sports Illustrated
"In the current economic environment, players and their
parents are more concerned than ever about preserving the
wealth they are going to earn," said Prashant Patel,
vice-president, High-Net-Worth Planning Services, RBC Wealth
Management. "A player's career can be cut short at any
time. They need advice to help them minimize tax, preserve
capital and ensure their money lasts for 40 to 60 years after
their professional career ends."
RBC's Sports Professionals Program represents professional
athletes across a variety of sports, including hockey, basketball,
baseball, soccer, football and golf. Athletes draw on the
expertise of RBC Private Banking, as well as the RBC Wealth
Management Services team of financial planners, lawyers, accountants,
tax specialists and estate planners.
RBC's 10 tips for newly drafted and professional athletes:
1. Don't let your signing bonus change your life.
Players drafted in the first or second round to the NHL can
receive a signing bonus in the range of several hundred thousand
U.S. dollars, but the majority of those players will not immediately
go to the NHL. Signing bonuses can be structured to pay only
15 per cent tax depending on where the athlete resides and
where he plays.
2. Manage your spending - you'll only get paid for seven
months of the year.
With a big cheque coming in every two weeks, it is tempting
for young players to buy big ticket items and live an expensive
lifestyle. But NHL players only get paid from October to April
(excluding playoffs, bonuses and awards). Many players draw
on a line of credit to carry them through. A financial plan
that includes budgeting can help keep players on track.
3. You probably have to fund 50 years of retirement.
Most NHL players will play for less than 15 years and retire
in their late-20s or early-30s. Those who are injured will
have even shorter careers. They have to start saving early
and invest carefully to make their money last throughout their
4. Careful tax planning can make a huge difference.
For many athletes, taxes are their single largest expense.
The multiple filing requirements of a professional cross-border
athlete can make tax planning very complex with the country
of residence dramatically impacting the overall taxes. Many
Canadian resident players take advantage of significant tax
savings by setting up a Retirement Compensation Arrangement
(RCA). Players who are married or have families can use income
splitting tax strategies such as spousal loans and family
trusts to reduce taxes.
5. Fluctuations in foreign exchange can have a big effect.
Most athletes are paid in U.S. dollars. If they rent, buy
or sell property in Canada or overseas, changes in the value
of the Canadian dollar can have a big impact. A number of
athletes mitigate their exposure through forward exchange
contracts and other hedging strategies.
6. Before you buy your dream house, evaluate the impact
of where you own property.
In Canada, mortgage interest is only deductible if the property
is used for investment purposes. For U.S. residents, interest
on up to US$1,000,000 of the mortgage on the main home or
a second home can be tax-deductible.
7. You will be asked for money regularly - so plan your
giving in advance.
Newly signed players could be particularly subject to aggressive
solicitations, so they should avoid significant donations
until they have a plan. Some athletes set up a charitable
foundation to raise funds, donate to charitable causes and
reduce income taxes.
8. Endorsement income can offer tax advantages.
Canadian resident players who receive endorsement income
could consider setting up a Canadian corporation to take advantage
of lower corporate tax rates. They will need professional
advice for this advanced strategy.
9. Protect your assets from lawsuits.
High-income and high-net-worth individuals are more likely
to be subject to lawsuits. Players should consider strategies
to protect their wealth from creditors, such as setting up
a domestic or foreign trust.
10. Protect your family's future through insurance and
estate planning. Ensure there is adequate disability insurance.
Also, some forms of life insurance can provide tax-free investment
growth. To ensure the player's family is provided for, it
is important that he make a Will and plan to minimize U.S.
estate tax, which can be as high as 45 per cent, as well as
probate tax. One common strategy is to set up a revocable
living trust to hold U.S. real estate assets in order to avoid
U.S. state probate tax.
The RBC Sports Professionals team includes retired athletes,
top advisors and wealth management specialists. RBC advisors
provide tailored strategies to help athletes manage their
finances and their lives, including cash-flow management,
cross-border tax solutions, investment management and estate
and retirement planning. For more information please visit
About RBC Private Banking
RBC Private Banking professionals help high-net-worth clients,
their families and their businesses simplify their banking,
manage their assets and take more control over their financial
futures. Private Banking teams deliver integrated wealth management
advice and planning with specialists across RBC, sophisticated
credit solutions designed for high-net-worth clients, customized
cash management solutions and tailored banking services for
the needs of high-net-worth families. RBC Canadian Private
Banking was ranked number one for best overall private banking
services in Canada, according to the Euromoney 2009 Private
About RBC Wealth Management
RBC Wealth Management directly serves affluent and high-net-worth
clients in Canada, the United States, Latin America, Europe
and Asia with a full suite of investment, trust and other
wealth management solutions. The business also provides asset
management products and services directly and through RBC
and third-party distributors to institutional and individual
clients, and has more than $480 billion of assets under administration,
more than $230 billion of assets under management and nearly
4,500 financial consultants, advisors, private bankers and
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For more information, please contact:
RBC Corporate Communications, (416) 974-1031
RBC Media Relations, (416) 974-2124