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Outside the Lines

Athletes, Dollars and Sense

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 Outside the Lines
Former NHL player Derek Sanderson, once the highest-paid athlete, recalls his big payday and the advice given to him by Bruins' owner Weston Adams Sr.
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 Outside the Lines
Sanderson, who squandered all of his money, talks about his biggest regret.
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Watch the re-airing of ESPN's Outside the Lines show on money and athletes July 1 at noon ET, and July 6 at 7 p.m. ET. ESPN The Magazine also takes a fun look at the topic in this week's issue.

Tuesday, June 3
Sanderson: No guarantees

When it comes to athletes and their spending habits, Derek Sanderson is at the top of the list of cautionary tales.

In 1972, Sanderson left the Boston Bruins to become the highest-paid athlete in the world when he signed a $2.65 million contract with the now-defunct Philadelphia Blazers. Later, he ended up as an alcoholic on a park bench in New York City, his fortune having been squandered on too many toys and bad investments.

Now, his life back in order, Sanderson is an investment specialist at Boston's State Street Research, where he manages $102 million for 160 clients, many of them current athletes.

As part of the Outside the Lines series, Sanderson chatted Wednesday, June 28, with users on athletes and money. If you missed the chat, below is an edited transcript:

Chris000: From the players you service, how many of them act like they will never run out of money?

Derek Sanderson: Almost every player is not conscious of the fact that it will end. Our job is to make sure that the money they make in their career will last a lifetime. We manage it with the philosophy in mind that they will be 60 to 70 years old and that their children will enjoy some of the money.

The basic philosophy here is that of tax-management -- in other words, let the money compound and grow. We try to curtail spending early, because you can do the spending later in life. Do as well in your sport as possible early on, pay attention to your sport, and live within restraint. You can't go and buy six cars.

We educate the players as to what risk is. Once you show the player how quickly the money can go, they get a good sense of calming down.

We have players in all the major sports -- NASCAR, NHL, MLB, NFL, and ATP. I started the business with hockey players because those are the people I know. And I wanted to get this streamlined, so that the educational aspect was there.

This business has a lot of hidden fees and we're very upfront about our fees. We only charge fees, no commissions. I don't believe I should look at any of my players as a dollar a pound. It would be difficult to give them straight-up advice if I'm taking a percentage.

Dantheman: How did your friends and family act after you signed your contract? Did they act differently?

Derek Sanderson: I was very fortunate in that my family is very humble. My dad started off as a mechanic and became a machinist. He's a working man, a union man. My mom and dad believed it was my money. I tried to buy them a house, but they didn't want to move.

There are families that believe that if the player hits the number, then they hit the number as well. You want to have the families realize that the money has to grow first. Often the player doesn't understand compounding and the family doesn't either.

If a player makes $5 million, probably half of that goes to the government. So you need to put what you have left away, and let the money grow. All players want to take care of their parents immediately; those are reasonable expenses to a point. But don't buy the $2 million home.

Patience is the key to success in money management.

J.C.: Are some players on an "allowance"? I've heard that some guys are.

Derek Sanderson: The allowance denotes childish controls. These are men that are accomplished at what they do. What we do is, we get their monthly needs (cars, house, etc.) and expenses, and budget that in, and have a checking account. We will wire to them money if they have bigger needs, for Christmas or whatever. But we keep as much money in the market as you can. But your checking account should be up to speed.

We don't call it an allowance. We call it a "budget to lifestyle."

Art260: Are many older players bitter at the kind of money players are making now compared to what they were making back in the day?

Derek Sanderson: There are a lot that resent it. I see the players on TV interviewed and they resent it. What I think they resent more than anything is the player of today does not recognize what we handed them. I took on free agency in court and won.

But most of us don't resent them. We still watch our sports. We still respect the athlete. I'd say 95 percent don't resent it because they know what it takes to get there.

Kentony: What is your biggest challenge to overcome when discussing financial planning with your athletes?

Derek Sanderson: The biggest challenge to overcome is getting them comfortable with the investment process. To get the athletes to understand compounding, to appreciate risk. No one can guarantee you anything. The athlete needs to understand what he owns, why he owns it, and what he pays for it. My advice to all athletes is, always ask the question: How do I get my money back? And how long will it take? Because there are often restrictions. You gotta watch the vehicles you get put into.

Dave R.: Who is your highest-paid athlete?

Derek Sanderson: I can't say who our players are. But I can say that without signing bonus, our top athlete makes $9.8 million a year. The players we have spoken about publicly are Cam Neely, the former Bruins; and Teddy Johnson of the New England Patriots.

Bruins forever: What will it take for the Bruins to finally win another Cup. Just a little time? New ownership? You and Bobby Orr coming out of retirement?

Derek Sanderson: The Bruins have a lot of talent now. They're going to surprise a lot of people next year. They're going to the free agent market this year. They're going to be a threat.

JDH0812: Do you have any thoughts on the current trend of hockey teams selling off game-used jerseys and equipment through online auctions?

Derek Sanderson: I think it's all greed. They're trying to get money from everywhere. What they need to do is make sports affordable to kids and dads who want to take their kids to games. If you don't make it affordable, more people will start to go to participation sports. When teams start auctioning off jerseys and sweaters, they're just selling it all.

Smichalski: I know most NFL rookies are enrolled in programs concerning saving money, how to budget and how to plan for the future. Do you think other professional sports should do the same -- or are they doing the same for their young players?

Derek Sanderson: NFL rookies camps, I've gone to those. I've presented at those. They're wonderful. They all should do that. They should do that in college, as well. They should have finance courses in college, on how to pick an agent, all that stuff.

The NBA does a pretty nice job, too.

Athletes have illusions, and you have to talk to them about eliminating those illusions. It's very hard to make it to the pros, but it's three times as hard to stay. You need good agents to help you in that area.

Basically, if you listen to what your parents told you, you're pretty well off.

MMM: Are you still going to schools and talking about the dangers of alcohol and drugs? You came to my school about seven years ago, and it was very beneficial.

Derek Sanderson: I don't do it as much as I used to. I went to 1,200 schools over a 10-year period, and that was probably the best thing I've done in my life. What I'm doing now is similar, in that we're protecting athletes, sometimes from themselves.

I don't go as often, but I still do it. If you do 200 schools a year, you don't have time to run a business! But it was very rewarding.

If anyone wants to contact me, if we can be of service to any athletes, you can reach me at

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