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THE BRIEFING Wealth management


neighbourhood, the so-called ‘golden triangle’ – an area between Alderley Edge, Wilmslow and Prestbury – which is famous for its expensive houses and supercars. Withinlee Road, its most expensive street, has an average house price of £2,336,000. Griffi ths founded Pro Sport in 2009 and has seen fi rst-hand the rise in player wages, and the need for professional fi nancial advice that comes with it. HMRC was investigating the tax aff airs of 246 footballers in 2020 according to UHY Hacker Young, which cited the complexity of image rights as a major factor. (Image rights are taxed at 12 per cent – much less than the 45 per cent rate on income tax that players would otherwise pay on their wages.) Complex fi nancial predicaments such as these are where Griffi ths steps in as a trusted adviser: ‘They’re thrown into the lion’s den with decisions that they would ordinarily not have to make as an 18–19-year-old person,’ he says. Indeed, clients from the world of professional football present unique challenges for wealth managers. They are not renowned for their frugality. ‘I had a call the other day from somebody who had an example of a client who hadn’t played a fi rst team match and had bought £3 million house,’ says Jonathan Gold, a partner at London & Capital who works with several sports professionals. ‘That sent alarm bells ringing.’ One important part of the equation is the duration of footballers’ peak earnings: according to the Professional Footballers Association, the average length of a Premier League career is just eight years. The task of the wealth manager, then, is to manage both long-term fi nancial planning and the habits of clients in their twenties who have the spending power of a company director in their mid-forties. One solution, says Gold, is to ‘save it all in a boring liquid portfolio’. But one wonders how often this is actually done. For Andrews, who has himself had to go through the ‘body blow’ of transitioning from football into a second career, a wealth manager needs to form a ‘protective shell’ and make fi nancial planning as important to footballers as the type of boots they wear. ‘It’s so hard to make it, I know that personally,’ he says. ‘So when you do make it, you don’t want to put the fi nancial rewards that you’ve made at risk. There’s no need to do that.’ S


Short but sweet


The GameStop furore brought short selling into the limelight, with some calling for it to be banned. Julie Wu, professor of fi nance at the University of Nebraska-Lincoln, says there are at


least three reasons why it’s an important part of the fi nancial ecosystem


1


It’s a useful tool in a bear market There are two ways to make money in the capital markets. ‘If you are bullish about a company, you can long, but if you are negative about a company, you can short,’ says Julie Wu, professor of fi nance at the University of Nebraska-Lincoln. Short selling is a good way to make money in a bear market and profi t from fi nancial losers. If the short seller gets it right, the strategy off ers a high return on investment.


2


Informed shorts correct overpricing in the markets ‘Short sellers have done their homework – they initiate a short position because they think a company or stock is overpriced,’ says Wu. ‘Short sellers discover negative information about companies. They’re just revealing what they know, which is then refl ected in the stock prices.’ Traders need both good and bad news about companies to make informed decisions. In the long run, short selling actually helps protect shareholders from losing big.


3


It provides liquidity and makes markets more effi cient When the Securities and Exchange Commission (SEC) suspended the ‘short-sale rule’ (which restricts short- selling) from 2005-2007, academic research shows that bid-ask spreads narrowed (reducing trading cost). Conversely, when short selling is constrained or banned, liquidity gets worse. Immediately after the failure of Lehman Brothers in 2008, the SEC temporarily prohibited short selling. As a result, small fi rms suff ered severe degradation in liquidity.


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