While it's not uncommon for former pro athletes to make headlines for blowing the wealth they earn during their playing days, Eugene Profit not only managed to safeguard his own money but has earned a reputation for making lots of it for others.
After a celebrated career playing defensive cornerback for the New England Patriots (1986 to 1989) and the Washington Redskins (1990 to 1991), Mr. Profit stormed onto a playing field not typically dominated by African-Americans or former NFL players -- financial advising.
Mr. Profit, which is his actual family name, 47, has grown his Silver Springs, Md.-based company, Profit Investment Management LLC, into one of the nation's largest African-American owned money management firms, with nearly $2 billion in assets under management.
"I was always a scholar-athlete," said Mr. Profit, a Yale University graduate with an economics degree. "I was an athlete, but I always knew there was more to life than just the game.
"I was sort of always focused on doing well in the classroom as well as in sports, and I think that has made the difference in how I've done past my playing career."
His tale is a far cry from that of many former pro players.
Despite the multi-millions of dollars some professional athletes rake in during the course of their careers, many become just as famous for filing big league bankruptcies shortly after they retire and their bank accounts have dwindled to nothing.
On average, 60 percent of retired basketball players go broke in five years after retirement; and 78 percent of football players hit rock bottom within two years of hanging up their helmets, according to Sports Illustrated magazine. To make matters worse, many get divorced after their peak earning days are over and often carry the added expense of child support payments and alimony.
The dubious riches to rags list includes names such as former heavyweight champion Evander Holyfield, who made $250 million in his lifetime but whose $10 million home recently went into foreclosure. Latrell Sprewell earned $50 million during his NBA career but wound up having his $1.5 million yacht seized by the IRS and his $5.4 million mansion foreclosed on by the bank. Most recently, former Miami Heat basketball player Antoine Walker declared bankruptcy and moved to a $915-a-month apartment with a roommate after earning $110 million in the NBA.
Broke former athletes are a sad epidemic that happens because they are unprepared for sudden wealth, Mr. Profit said. They also have a far shorter span for earning top dollar than most other well-paid professionals.
"As an athlete, you get lots of accolades and praise, so they are not exposed to the harsher side of life," Mr. Profit said. "Very often, pro athletes don't come from a moneyed background. They have no experience managing wealth, and that's a skill in and of itself."
Pittsburgh wealth manager Carrie Coghill recalled a highly compensated professional basketball player for the New York Knicks she advised about 10 years ago who explained to her that he grew up struggling and he fully intended to enjoy the wealth he had acquired.
"I gained insight from that," said Ms. Coghill, president and CEO of Coghill Investment Strategies, Downtown. "As a financial adviser, there's a balance you walk between enabling them to enjoy their wealth while planning for the future. If I didn't become sensitive to that mindset, he would not have wanted to work with an adviser."
Eventually, Ms. Coghill said, the player, who she declined to name, did go broke. He bought his mother a nice home and lavished other friends and loved ones with expensive gifts. She said he spent all of his enormous signing bonus in one year and his entire playing career lasted only three years.
"He lost his wealth, but he gained satisfaction seeing his family improve their standard of living," Ms. Coghill said. "I think it's unfortunate, but he got gratification out of that, and I don't think he regrets it. He made a decision to help his mother rather than look out for his own future, and there's something to be said for that."
Mr. Profit, who grew up on the hard streets of South Central Los Angeles and graduated from Yale in 1986, said he knew nothing about the financial system or Wall Street before he earned the Ivy League scholarship that set him on the path to career and financial success.
"At Yale, I studied economics and financial markets and developed an appreciation for how companies operate," he said. "The real beauty of investing for me is the return you get doesn't necessarily come from your physical work.
"When you collect dividends on stocks, that money just appears in your bank account. You don't have to punch a clock or work a job. The money coming from your portfolio is your money working for you once you get through the initial part of building a portfolio."
Profit Investment Management is an SEC-registered advisory firm that manages funds primarily for state retirement plans and corporate retirement plans. His company also runs a mutual fund called the Profit Fund (ticker symbol PVALX) that allows small individual investors an opportunity to devote as little as $50 in investment money to the very same portfolio he uses for institutional clients with accounts topping $150 million.
The Profit Fund has posted a return of 16 percent so far this year.
The firm he started in 1996 with $100,000 in assets under management has today grown to 15 employees, five of whom are financial analysts.
While his firm does not work directly with individual retail investors, Mr. Profit said he understands that delayed gratification often is the greatest obstacle for those who are new to the world of stocks and bonds.
"Let's say you have $5,000 and the portfolio pays 10 percent," he said. "If I tell you it becomes $10,000 in a little over seven years, you're not too excited about that. But the same principle works with larger amounts, such as $100,000.
"The trick is if you get started with the smaller amount, it opens the door for larger returns down the road. A lot of people don't get started or they don't stick with it."
Tim Grant 412-263-1591 or firstname.lastname@example.org.