Student-athletes can now earn money. Here are the pitfalls.

Sunisa Lee has won three Olympic medals – gold, silver and bronze – and, in the process, has grown from little known outside of gymnastics to an escape star.

When she arrives at Auburn University in a few weeks, she will be among the first Olympians at the university to be able to benefit from her name and image since the National Collegiate Athletic Association decided in June to allow athletes academics to earn money while maintaining their amateur status.

For someone of their caliber, the payoff could be substantial. Lesser-known Olympians are also likely to benefit financially, along with hundreds of college football and basketball athletes, the two major income-generating sports.

But the NCAA decision means student-athletes will have a new issue to consider. In addition to playing their sport, getting an education, and representing their university, many will want to take the time to introduce themselves and enjoy it.

Navigating a new world with exciting financial prospects is never easy for anyone. But financial advisers and athlete agents said they fear sponsorship companies could take advantage of student-athletes, who have limited life experience and financial expertise.

“Michael Phelps has always benefited from the name, the image and the likeness,” said Steve Trax, sports and entertainment group leader at financial advisor MAI Capital, referring to the swimmer who won 28 Olympic medals. “What has changed is social media. This has broadened the opportunities not only for your high performance athletes, but also for Olympic athletes and more specialized sports athletes.

Members of an elite college program, like the University of Florida softball team, may not have national recognition or professional outlook, he said, but they still have earning potential.

“In a college town like Gainesville, some of these top athletes in a sport like this will have unique opportunities with a pizzeria or sporting goods store,” Mr. Trax said, although these players will be looking for offers worth tens of thousands. of dollars, not hundreds of thousands of dollars or more.

“This is where the NCAA’s decision can be really useful and beneficial, to distribute the wealth among other varsity athletes,” he added. “What I hope isn’t is that the almighty dollar rules the day.”

The conversation must begin with these student-athletes and their parents understanding their obligations under a sponsorship contract.

“These are uncharted waters, and these athletes need to have someone to educate them on what they are up to,” said Michael Liersch, head of advice and planning for the Wealth Management and Development division. wells Fargo investment. “It is more concrete if it is a traditional merchandise offer. But if it comes to agreeing to allow your name and image in sponsored social media or videos on YouTube and Twitter, it gets more complicated.

Mr Liersch said he was also concerned that the headline deals a few athletes are likely to enter into could negatively influence young players.

“There’s going to be one person who’s going to make an amazing deal, and that’s going to define the narrative,” he said. “The kids are going to want to be this emerging athlete. This may not be the right focal point, given the alternative of focusing on education or a career that has more longevity. “

Mr Trax said he was helping a family friend who plays basketball at the Big East Conference negotiate several sponsorship deals.

“I reviewed three contracts and made aggressive changes to each, around the basic contractual language but also the payment terms and the athlete’s obligations,” he said. “It’s an exciting and attractive field, but the potential clientele is ripe to be taken advantage of. “

Joe McLean, managing partner of Intersect Capital, which manages the money of several basketball players and professional golfers, said he was concerned that players would be distracted by the lure of profiting from their image.

Mr McLean, who played basketball at the University of Arizona, said when he was young and dreamed of greatness in the National Basketball Association, he had a Larry Bird poster on it. his wall.

“I didn’t have a picture of an NBA check,” he said. “Now dollar signs are part of that dream. Having two dreams usually doesn’t work. You must have a dream, and everything else will be realized from it.

At the same time, Mr. McLean is working with his alma mater to develop a program, Arizona Edge, to help student-athletes understand their personal brand and how to maintain it.

“It’s about how to negotiate deals, how to have a growth mindset, how to define your intellectual property,” he said. “A lot of people will monetize the athlete and not the other way around. This is intended to help the athlete.

Financial advisers have also said they are concerned universities are simply entering into global marketing deals on behalf of their athletes. While students would get a share of the income, most of the money would go to universities.

Others asked if universities might need to step in to ensure that only a few athletes don’t take all of the support dollars.

“The majority of athletes who don’t play men’s football or basketball won’t have their lives changed,” said EJ Kahn, advisor at Wells Fargo Advisors. “The solution is something like Title IX, a solution mandated to help level the playing field between men and women. Without the NCAA getting involved, there will be drastic inequalities. “

Advisors pointed to three types of athletes who could get the most out of the new rules: football and basketball stars who would previously have been pressured to leave college earlier; female athletes who could turn professional; and exhibition athletes in lesser-known sports with little or no professional prospects.

Ronnie Brown, a financial advisor in Atlanta who played football for Auburn and was drafted in 2005 by the Miami Dolphins, saw the benefits of the NCAA program for college players like him and those who wouldn’t play professionally.

“Once you go to college, you’re one step away from being a young adult, where you’re supposed to earn your own way,” Mr. Brown said. “It forces you to be a lot more responsible.”

The earning power of some female college athletes may actually be higher than that of amateurs.

“Female athletes when they go professional earn a lot less than men, but in college they have huge followers,” said Sharon Klein, president of family wealth at Wilmington Trust. “It could really help women. “

Then there are the sports that have niche followers. Their athletes can take advantage of local opportunities, or they can attract corporate sponsors that cater to sports enthusiasts, such as archery or fencing.

Several advisers have recommended that varsity athletes have a bigger plan than just signing one-off deals.

“They have to ask themselves, ‘How is this going to fit into my overall plan? ”, Ms. Klein said. “It positions these athletes in a much better way to be successful. Everything revolves around this financial literacy.

And it’s something that all student-athletes can benefit from, no matter what they do after college.