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Navigating NCAA Athlete Compensation

A university has historically taken on the responsibility of educating, training, and housing its athletes. However, as rules change that will likely allow athletes to be compensated, the university is taking on the responsibility of guiding them on financial decisions that will impact them for the rest of their lives. In late 2019, the Fair Pay to Play Act was signed by California Governor Newsom, which allows college athletes to not only profit from their name, image, and likeness but also hire an agent. As a result of the bill, the NCAA announced it would allow athletes to “benefit from the use of their name, image, and likeness in a matter consistent with the collegiate model.” However, because of the complexities of the decisions to be made, as of January 2021, the NCAA is set to delay their vote allowing college athletes to be compensated after receiving a warning from the Department of Justice about potential antitrust violations. Although the bill has been delayed, six states have already passed similar bills and are expected to be soon voted upon.

There are many guidelines to be developed, but the universities’ responsibilities are a fiduciary to its athletes and advising them throughout this process. At a minimum, the athletes could be looking for guidance on hiring qualified trusted advisors and relying on university guidance in the process.

As a start, university leaders should make sure they have a list of qualified advisors to recommend to their athletes. It is essential to provide a pool of potential advisors, including financial advisors, certified public accountants, and attorneys.

What questions need to be asked to ensure these recommendations are for qualified advisors with their athletes’ best interest in mind?

  • Are they licensed?
  • Does the advisor work in the paid athlete space, and if so, for how long?
  • Is the advisor taking new clients and have the bandwidth to support your athletes? Do they have an internal team they work with?
  • Will the advisor work in the best interest of the athlete?
  • How are they paid?  Is it based on sales or a manner supporting being a trusted advisor?
  • Has the advisor supported the University and the athletic department in the past?
  • Can the advisor provide recommendations from previous clients?

Historically, only athletes turning pro needed to develop relationships with advisors to guide them in the process, but as the NCAA moves forward with the implementation of paid college athletes, the development of these relationships early on must be reevaluated and expanded upon.

Athletes need to have more financial education training earlier in their college careers and opportunities to meet professionals. Opportunities should be offered to provide training sessions and one-on-one meetings to develop a relationship before the athlete needs to hire someone to represent him or her. Providing potential advisors with opportunities to interact with athletes throughout their college career is paramount, as these relationships created now could last a lifetime.

Authors: Chanda Horne, CPA, chorne@withum.comJosh Gelernter, CPA, jgelernter@withum.com

For any questions or further information, please contact a member of Withum’s Sports and Entertainment Team.

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