Compounding Knowledge with Koko Archibong
Q: Based on your experience as a former player who now works closely with athletes, what are areas you think professional athletes need the most guidance?
A: As a former pro basketball player for 10 years I believe athletes need assistance with financial literacy and the fundamentals of wealth planning. This is a knowledge gap facing all investors. However, it is more urgent for athletes, given their outsized earning potential at a young age. Unfortunately, a lot of athletes, including me when I played, get too focused on how much money they are making and not on how much they are actually keeping and investing, which is critical to wealth creation and achieving long-term life goals.
Q: Can you explain your current position and how you help athletes tend to their money?
A: I work for the Capital Group Private Client Services in downtown Los Angeles. Our parent company, Capital Group, is home to the American Funds mutual fund family. It is a privately held company and one of the largest and most widely respected investment management firms in the world. Capital Group Private Client Services manages more than $23 billion in assets, while Capital Group manages more than $1.7 trillion for millions of individual investors and corporations around the world.
I am part of a team overseeing more than $1 billion. We provide financial advice to help families, charities and endowments protect and prudently grow their wealth over the long term. My role is to provide access to what I believe is the best investment knowledge available. We help athletes the same way we do all our clients: We help them develop comprehensive wealth-building plans, and monitor their investments over time.
Q: You do your fair share of speaking engagements with current athletes, especially younger ones. What are some key financial points you stress?
A: I love sharing my story with athletes and young people at all levels. It’s gratifying to be able to pay it forward and try to help the next generation on its journey. The tips I share are: 1) Start saving and investing now, 2) Connect as much and as widely as possible and 3) Enjoy the journey. These are lessons I learned late in my career that I wish I had known when I was getting started.
The first tip is pretty self-explanatory. It refers to investing both money and time wisely to be able to live a comfortable life after sports. It includes rounding out your knowledge with marketable skills that can be used in a post-sports career. This is the reason I got into this line of work.
The second tip is geared toward getting more athletes to understand the tremendous platform they have while they are playing; they need to connect with a variety of people and develop their curiosities and interests outside of sports.
The final tip is a reminder not to take the experiences they are afforded through sports for granted. The moments that you have to live out your dream of playing professional sports are fleeting. To maximize your playing days, you have to strike a balance between your ambition and being grateful for the little things along the way like the friendships created with fellow teammates.
Q: Athletes may feel overwhelmed by trying to perform at the highest level while attending to other obligations. How would you recommend an athlete become more financially literate and begin the investment process?
There are a ton of ways athletes can educate themselves and become more financially literate. There is so much information tailored to each person's learning style. Two of my favorite books on the topic are The Richest Man in Babylon and The Millionaire Next Door. If you learn visually, you can watch YouTube videos or Ted Talks to find sound financial advice.
There are several podcasts; one of my favorites is Freakonomics Radio that provide a wealth of knowledge. These resources are free for the most part and readily accessible to anyone who is interested in becoming more financially savvy. Once athletes educate themselves, the next step is to find a financial planner or advisor they trust to initiate a conversation about wealth management. Together, they can make a game plan to ensure the athlete’s goals are met.
Q: What are some common misconceptions you see among athletes as it relates to their finances?
A: The most common is the belief that the athlete is going to be able to keep earning at a high level forever. As athletes, we all know that our career will end someday, but we are somehow hardwired to play and act like it never will … until it does. When you are playing, and hopefully seeing a steady increase in pay as the years progress, the reality of the situation is that your playing days will eventually come to an end. That’s why it’s critical to have a game plan in place well ahead of earning your first check and why it’s prudent to maximize the wealth you have worked so hard to achieve.
Q: Can you explain the importance of athletes thinking long term when it comes to both career and money management?
A: When we talk about building wealth with our clients it is done over the long term primarily because time is an investor’s biggest asset for two reasons: 1) The power in compound interest and 2)The ability to withstand the ups and downs of the market. In its most basic form compound interest is really just interest earning interest. To truly harness the power of compound interest requires time because the longer that money compounds the faster it grows. Taking a long term perspective is also critical for investors to weathering the normal market gyrations particularly when markets are down because depending on how much of a dip they have taken it will take time to recover the value lost. And in terms of their careers, athletes should be thinking about their long-term financial needs; they also need to plan for a retirement that has to last for decades.
Q: With the size of contracts increasing and the plethora of business opportunities presented to athletes, what are some important precautions athletes should take when looking for new ventures?
A: More than ever, athletes are being courted by an array of professionals who seek to raise capital for their business ventures. Again, I think it is critical every athlete have a solid wealth-building plan in place and stay disciplined to adhere to it over the long term. This, along with having the guidance of a trusted financial professional, are some of the main ways athletes can become savvy investors and not succumb to FOMO (“fear of missing out”) with each new investing fad or opportunity. Putting together a smart portfolio first and having the discipline to stick to the plan will allow athletes to determine whether they have any excess cash to invest in more risky ventures. And that gives them the ability to vet opportunities that come their way based on whether or not those opportunities fit into their investment portfolio and their overall objectives.
Q: Why is being a frugal athlete important in your eyes?
A: Because it’s critical to every athlete’s success after their career in sports. As amazing as the time on the court or the field will be, it’s fleeting. It’s just a fraction of the life that a player will live after he or she is done. Being wise with money can set you apart in two ways: 1) The money you save and invest early on can provide the type of lifestyle you and your family want well past your retirement and 2) Money can provide a needed cushion as you transition out of the game and into your next endeavor. Enjoy the journey.
CPWA ®, is a Senior Client Relationship Associate for Capital Group Private Client Services, working on a team of experienced investment professionals. He has been with the firm for three years. Prior to joining Capital, Koko was the Assistant Athletic Director at Pasadena Polytechnic School. Prior to that, he had a 10-year career as a professional basketball player, playing both in the NBA and internationally in France, Germany and Poland, as well as a member of the 2012 Nigerian Olympic team in the London Olympics. Koko holds the Certified Private Wealth Advisor designation and is a CFA level II candidate. He has a degree in Medical Anthropology from University of Pennsylvania as well as a Master’s Degree in Public Health with a focus on the Management of Health Systems from the University of Liverpool. Koko is based in Los Angeles.