Joe McLean: Winning Strategies for Advisors Who Serve Athletes

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Welcome to Barron's The Way Forward. I'm Greg Bartolis, and my special guest is Joe McClain, managing partner, family office at MAI Capital Management. The Barron's-ranked advisor's clients include Academy Award winners, NFL and NBA champions, and MLB All-Stars, among other notable figures. Welcome to the podcast.

Thanks, Greg. Happy to be here.

You have a great story involving basketball and your path to MAI. Before we get into the topic of what it's like to advise these clients and what advisors listening should know, please tell us a little bit about your background, how you got to MAI, and what you currently do?

Sure, it's been an incredible journey for me. It's something I never could have imagined. My dream, my passion from the time I was 8 years old was to play professional basketball. I had Larry Bird and Michael Jordan on the walls, and that's who I aspired to be. I had a pretty good run at it. I played at University of Arizona for an incredible coach, Lute Olson, who taught me a lot of life lessons that I still share today. Then went on, I would get cut Probably every year for 4 years up by an NBA team, and then I went to Europe and played there for just about 4 years. Only 2 Americans per team over there, so I got cut a lot. I lived in 11 countries, but a great way to see the world. Eventually had to find a new path for me, a new journey in terms of a career, and found myself in financial services just by luck. I met some extraordinary people that were willing to bet on me and persevered and grew up in this industry, and then eventually found myself as a financial advisor over time. And the light went on for me 15 years into my career that I could go back to a sport that I loved and serve them in a much different space.

Right, kind of having your cake and eat it, being, applying your love for it, being in it and—

That's right, that's right. And it was, I mean, I grew up learning how to work with uniquely successful entrepreneurs and just figured out a lot of my old teammates came back to me and said, hey, I think you're in that financial world. Can you look at my stuff? I'm getting ready to retire. And then realized, most of these athletes weren't taking all the steps I had learned over the last 15 years that other families did to create lasting generational wealth. And so, really blessed to get, have an opportunity to get into that space and serve these athletes.

I saw there were a couple of interviews with you on YouTube and they were really fascinating. One of them, you talked about your experience playing overseas and how each team that you went on, kind of, they wanted something different from you.

That's right.

And you, in a way, had your own thinking about what you wanna do or what you should do as an athlete. And it was really fascinating. And you also had a great story about in China as well. I don't know, do you wanna just talk a little, however long you want, and then also how I think you ended up with the Kings and et cetera. So yeah, it's a really interesting story.

I think that was a situation where I was cut 5 different times in 1 year, and it was actually, it was my most successful year. And, but each time I got cut, As I think everyone knows, failure is a great lesson in life, only if you evaluate that failure and identify what you could have done better and what you could work on. And for me, every time I got cut, it was, you know, what my role was with a team and how I could persevere and thrive. And the end of that story was that I ended up making the Sacramento Kings for a very brief period of time and then was cut. A wonderful experience. And Europe taught you all kinds, when I played over there, there's no binding contracts, right? And there were times where I wasn't paid for months on end.

Right, I think one of the teams you got there and a short time later, like, oh, we ran out of money.

Yep, one ran out of money and one refused to pay us, but we were going into the playoffs. And myself and the other American, we agreed that we were not gonna play in this game unless they paid us. I said, you gotta commit to this, 'cause I'm not gonna step foot on this floor until we get our money. And we went and confronted the coach, didn't really speak English. Was very upset with us, but stormed off and found the general manager. General manager came to us, spoke a little bit of English and said, "We'll pay you after this game, we promise." And we said, "Nope, we're not getting, we're not playing until you pay us." And then eventually the owner came and said, "Give me 10 minutes." It ended up being about 20 minutes. The game was starting in 25. They came back with 2 bags of cash. And we were looking around saying like, "Okay, what do we do with this money? We don't know anybody over here. There's no locks in the locker room." And so we had met this American that was traveling around the country, just hopping from city to city. And we said, "All right, we have a proposition for you. I'm gonna give you half this money, and the other American's gonna give you half of this money, but you have to sit in the front row. You cannot move. If you leave, I will run off this floor." And for me, it was about $16,000. The other American had a little bit more. And so we gave him half our money. Put him on the front court, and then we stuffed the rest of it in our jock and played with over $20,000 in cash on the court. Wow. And we won the game. It was an interesting lesson. What kind of bills?

Obviously not $1 bills, but what were the denominations?

They were all hundreds. They were all hundreds.

That is awesome. You're probably the first and only, maybe, players to have played with money like that.

I think so. I had heard years later that Robert Parish for the Celtics would always forget to cash his checks. So he actually played with checks in his socks. But as a financial advisor, that was my first experience in handling it and managing money.

Well, that person, that was like, 50% is ridiculously generous. I mean, I think 10% would be—

Well, we paid for his trip for the rest of his tour. So he was willing to sit tight.

And one last question on this story. While you were playing, even though he was more or less in eyesight, was that at all a distraction? I mean, were you like shooting glances that way or were you still focused as ever on the game?

Yeah, I mean, we were 20, 3 years old and knuckleheads of it and just cared about playing the game and money really wasn't that important to us, but we were tired of being disrespected. And so we were focused.

Well, that's also a great lesson in, you know, self-advocating, right? Like, heck, you value us?

No question.

Pay for us. No question. Excellent. That's a great entryway into this. So, yeah, tell us a little more about working with athletes, what you do, things clients should know.

Yeah, it's when I got into it and realized most of the athletes weren't making these decisions at other uniquely successful families were, spent about a year just focusing on what were the pain points? Why were they not prepared for retirement financially? A lot of it was not necessarily poor investments. It was a lot about the process of how they focused on money going in and out of their life. Obviously, they earned wealth in a very short period of time, but had to create a plan for a much longer experience if they wanted it to last. But I quickly realized it wasn't about building a financial plan where you never had to work again.. It had to be using this money to learn how to live your life financially and responsibly while at the same time beginning with the end in mind to think about what's next. That's one of the hardest things for most athletes to experience is really the death of your career. No matter how successful you are, eventually you have to stop playing. And the things that you miss typically aren't the fans or the games. It's the bus rides, it's the locker room, it's a sense of accountability, it's the schedule, it's a focus, it's a collective effort. The second you retire, all of it's gone.

I mean, it's a little bit metaphor for even for retirement for many people, their professional life is their identity.

Same, same, yeah. So the quicker you could begin to define your professional locker room in life, it will make it easier. It won't make it, it won't solve it, but if you start creating curiosity in terms of what could be next, you can start learning from people. Obviously, this is a class that nobody taught us how to do in terms of managing our financial life. But so I started building that process out. And as an advisor, it has to always be obviously more than just yourself. How could you also bring people around that know more about things that maybe you did or you do and you all collectively get better? You build that sense of accountability with each other. And then once we started establishing very, very short-term plans, it led to longer-term success. We found reasons that people could focus on things to say yes to so that they had a reason to say no. Because as you can imagine, as a young person coming into wealth, one of the hardest things to say is no.

Right. I mean, I just, I'm kind of in awe at the challenge, presumably. I mean, let's contrast this with clients who are retirees or near retirees, right? It's like very, clear. You have a set of assets, the work trajectory is clear. There are many fewer unknowns. The challenging thing I'd imagine with athletes, especially younger ones, is they often have short careers to begin with, 3, 4, 5 years on average, depending on the sport, or 6, what have you. Some of them can hit it massively big, many won't. There are lots of unknowns, let's put it that way. And then especially with young, younger people, it can feel like money falls from the trees, and it's hard for them to imagine that it won't forever. So there are a lot of moving parts. So tell me about that whole process and how you, you mentioned like baby steps, getting ways to buy in and have yes with smaller steps initially, but.

Well, what's interesting now is that I began that part of my career in 2011 and nobody wanted to work with young people or athletes. They felt like they were babysitting them. They didn't want any part of it. Their wealth management firms were not typically focused on this. Now fast forward to today, There's tens of athletes that make more money than Fortune 100 CEOs. And so you've created this, there's this entire industry focused on sports. It's become its own asset class, right? And these are the assets of the asset class. And so what I found is to create a relationship where there is no judging, right? We were all young at some point and just needed some directional focus with others that could be, you know, some level of a mentorship. There are some times where I'm a father figure, but the goal is to not be a father figure. It's maybe a big brother over time. But the blessing that I've had over time is I learned from some of my mistakes advising. So, when I first got into that part of the business, I thought, I have a 15-year head start on you around this financial knowledge. I'm gonna share it with you. Just listen to what I'm saying and follow the roadmap. And I had a lot of confrontation. With some of the clients and realized this is, it wasn't working. It really wasn't. And so, I had to find a path.

But why, more specifically? What was that? In what ways was it often not working?

I think two things. One was I wasn't listening. And everyone came from a different background. They had, obviously, they had a lot of other people around that they, some they wanted to honor and some, they wanted to get rid of. I mean, think about when you watch these drafts and you see someone sitting on a couch and they get drafted, there's a lot of people behind the couch. Why are they so happy, right? Some are truly happy for you. Some are probably have some other motives. So there's just so much more that goes on and I wasn't listening and I wasn't learning from them. Sometimes they wanted to take more risk with their money and I was unwilling. Until we were able to create a structure to then give them a path to have more entrepreneurial spirit. So the last part of this I will say is I wasn't preparing young people or anyone for conflict. If you really wanna have a great professional relationship, the best advisors aren't afraid to get fired. And so, but you can't just go at someone hard without creating the boundaries. And so what I found to create a professional relationship that prepares people for conflict, there's two things that have to happen. And now I have these conversations in advance. I would say, at some point, we're gonna have conflict. There's no question. But when we have that, there's two things that have to happen. One, we have to have mutual respect for each other. I'm never gonna disrespect you, so don't disrespect me. And second, there has to be a compromise. Sometimes you're gonna win, sometimes I'm gonna win, but we have to agree to those terms and continue to move forward in a positive direction. The second I started having those conversations in advance, and then we'd go at it a little bit, you could, now you have, like, you can remind each other, remember what we talked about?

You established the guardrails of, yeah, yeah.

Because before, when I was going at somebody, I almost got fired a bunch of times just because they felt like they were being disrespected, and I probably was disrespecting them on some term.

Right, I think it's, yeah, putting your cards on the table initially, saying these are the terms, total transparency, that makes a lot of sense, yeah. Tell me, like, what are trends or what are you seeing now?

And yeah. So what's interesting is, you know, this is on the financial side, the wealth management with what we're doing, this is very much a family office model. And you're hearing that term all over the industry now in terms of people establishing that. And I would say it's the right trend to think about, but it's very much something that has to be built around service, not the business side. All right, so when we figured out that in order for someone to have a longstanding invest— successful investment career, you had to understand what it costs to be you. How could you make it cost less to be you? So we had to start paying their bills and doing bookkeeping and doing tax planning and build a tax department. You had to think about what are the risks that are associated with all the things that are around you? And so creating a risk management department. There's all these other things that helped us inform what we believe to be the future of advice. And now what's interesting is you look at the history of advice has really evolved into a couple different value propositions dating back to 1981. I think the oldest baby boomer turned 35 in 1981. And the only value proposition in the marketplace was, I'm gonna give you access to the capital markets, right? And when I teach younger people, that's Pursuit of Happiness, great movie, Will Smith. And all he's doing is cold calling AT&T and PG&E employees 'cause they couldn't go online to buy a stock or a bond. Eventually, those baby boomers got older and it turned from access to alpha, right? I had better research than anybody else, right? That's the movie Wall Street in terms of greed is good and going after information. And then eventually, these baby boomers started retiring and it became about spending and income strategies. I had more, I had the better Monte Carlo analysis. You fast forward to today, and what's interesting now is everyone now is beginning to focus on spending and income, but more in your, their entire life, not just in retirement. And so the trends are working with younger people earlier, getting them to make better financial decisions, creating a copiloted experience, which I think is really, really positive. And that's helping inform what we now see with the future of advice around the next generations.

Tell me about how, I mean, we talk about NIL and just more money and it's going younger and younger. It seems like a totally different world than even 10 years ago. What is that reality? How does it manifest with the, with the athletes and with the clients and entertainers? Are they likewise bringing a lot more awareness to the table? Do you have a more, to generalize, a more informed client engaging now than years ago? I mean, how does, what are the dynamics? Or maybe some things don't change. I'm curious about all that.

What's interesting is that they're, they, everyone wants to be more informed and they're far more curious about their money, right? So kind of fast forward, may remember my dream was I had Larry Bird and Michael Jordan on the wall. I never had NBA paychecks. On the wall. That wasn't part of the dream, right? To get paid. And now young people are exposed to that at such a younger age. It's almost like we're tearing down those posters of where they want to go. And I would say that my first reaction, now that I'm really in it intimately now, now in high school sports even, is that we try to preach, don't let NIL, as an example, cause you to hit the snooze button. I had a teammate at University of Arizona, and I can name his name 'cause he'd tell you the story, Damon Sotomayor. Who would beat me to practice every day, and he'd be there later than after practice. Incredibly focused, became Rookie of the Year in the NBA, came into an abundance of wealth, and found himself starting to hit the snooze button. He literally was doing it and then could see an out-of-body experience, like, why am I doing this? What's happening to me? And it was this wealth that had this great abundance that was causing him to do that. Now, when you get NIL money and you get this super early, you're starting to— you could, I'm not saying everyone does, but you could lose focus as to what the real dream is about.

That's a really interesting point. That's a really fascinating point. Yeah, especially with social media magnifying everything and whatever the reality is, making everything seem even bigger than it is optically. That's right. Speaks to the whole idea of staying hungry, right? Your company has a long history with athletes. And I think that Given that there's so many people trying to do what you're doing now, that's gotta be a big help. And obviously, once you get big name athletes, to some extent, there's probably a lot of word of mouth and referrals, people who can vouch for you. Beyond though, your heritage and that, what are you guys doing to, you know, stay very prominent and competitive and differentiate yourself from others?

I think it's continuing to modernize the business uniting a lot of the clients together. And so I think one of the other trends, if you're looking for trends, is building this sense of community within the client base. There's this wonderful mutual admiration club of athletes and executives and navigating the locker room with the boardroom. And so we have a lot of clients that are now giving together. Obviously, they're investing together, but making this a partnership. Where one of the 50-year goals with MAI for athletes was to take them from this athlete to an entrepreneur, to an owner in everything they do. And so now we're building this collaborative effort to make a lot of our clients partners in this business and learn from them as to where we want to take this. And it's great feedback, for better or for worse sometimes in the short term, as we navigate this. It's really exciting times for what the future looks like.

Excellent. I want to just ask you a couple quick questions, and these are just questions with a general answer. So on balance, which athletes from, you know, basketball, football, baseball, et cetera, which would you say are maybe most and least risk-averse when it comes to investing, planning, et cetera?

It's an interesting question, and I think I have part of the answer just through experience. The athletes we work with that were put on a bus typically make, prior to making their big contract, typically make better financial decisions in the short term. So baseball players, no one goes, no one gets drafted. You may get a signing bonus, which is great, but most of them have to go to the minor leagues and you're put on a bus. It adds this level, heightened level of humility. That's immediate. I experienced it. I went from a Final Four to then living in Bismarck, North Dakota, and on 17-hour bus rides with another player at Duke who was an All-American. It's like, we're just on a bus now.

And they make very, very little money, especially compared to MLB. So you're right, they really know what it means to struggle.

Hockey was the same way, right? And so where there's, where wealth comes faster, at a younger age, you could fall victim to this whole concept of where there's great abundance, typically there's less discipline. Yeah.

It just happens, right? I can totally see that. Now, this might correlate with that, but I don't know. Can you generalize and say which athletes are most informed, where the learning curve is most gradual, where there's more, oh yeah, yeah, that makes sense, I get it, I get it, or is that just it really does not correlate whatsoever with whatever sport an athlete is participating in?

You know, it really, there is, I wouldn't be able to find any common denominator. You know, in the NBA, you're forced to figure it out faster. The money comes faster and it's much bigger, right? It's the, there's, you know, players making $40, $50, $60, $100 million a year. Yeah. All right, and this is very sophisticated and you could actually make mistakes and still get away with it. In the short term because the money is so big, but you are forced to learn faster and sooner.

And what's a popular misconception that people have about maybe athletes and money? Is there something that the public has wrong in general?

Well, I think everyone's starting to, those stories of people going broke and making knucklehead decisions, that happens 'cause that happens in life. That's not necessarily a sports or athlete thing, right? Our goal and for a lot of athletes' goals is to become the new pillar in terms of how you make better financial decisions at a younger age? How do you build wealth? How do you build sustainable wealth? How do you give appropriately? How do you have impact in community? And so I would want people to know that there's a lot, athletes are a lot smarter than you think. They could actually contribute in a big way in terms of what the future of advice will look like. But I think most people know that. And we're all athletes in different spaces. I actually, if I could put it back on you, I've heard, that you are an athlete in some regards. If I put you on the spot.

You're hearing that I was?

Yeah, that's what I heard.

I was actually, well, in high school, I was on the wrestling team, but beyond that, no. No?

No. What about, I heard that you are, you've been a successful adult spelling bee athlete.

Yeah, I guess strangely enough, me and a couple of high school buddies, we participate in a, spelling bee at our local library. And I think 2 years ago we finished in 2nd place. We haven't quite won it, but anyway, that's kind of a weird thing.

Can I put you on the spot? I looked up what was the winning adult spelling bee word in 2003. Can I put you on the spot and see if you can remember it?

Oh boy, I feel the odds of me getting this right are dramatically low, like something like less than 3%, but sure, bring it on.

Okay, you ready? All right.

Omokase.

Say it again.

Omakase.

Omakase.

All right, I'm going to definitely get this wrong.

I can use it. You want a definition? Sure. It's an experience where you go to the Japanese restaurant and you allow the chef to create the experience and cook the food for you without any feedback.

Okay, so I'll probably get 2 letters in and you go, "Err." O-M-O-K-A-S-E.

Close.

Yeah.

What is it?

O-M-A-K-A-S-E. Oh, wow.

Okay. All right. Well done though.

That's a great one. So, well, I think an incorrect spelling bee question is a great way to end it. Thank you so much for joining us.

Thanks for having me.

My pleasure.

Thank you.

My guest has been Joe McClain. For more podcasts and the latest wealth management news, visit barons.com/advisor and be sure to check out The Way Forward: Next Generation A new podcast that puts the spotlight on the emerging leaders who are shaping the future of financial advice. For The Way Forward, I'm Greg Bartolis.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.