Financial Education Matters: A Conversation with Darren Woodson

[Music in background]

Please read important information at the end of this program. Recorded on 12/14/2022.

[On Screen:]

Don Plaus

Head of Merrill Private Wealth Management

Don Plaus: Welcome and thank you so much for joining us. I’m Don Plaus, Head of Merrill Private Wealth Management, which also includes our Sports and Entertainment group. And on behalf of Merrill Lynch Wealth Management, I am thrilled to be here and host today’s conversation around the importance of financial education. For those of you who are new to Merrill, our advisors offer a range of capabilities to help individuals, families and businesses pursue their financial goals. Our clients come from diverse backgrounds and professions. And our advisors are focused on the best interests of our clients. And when it comes to advising sports and entertainment professionals, we understand their unique financial employment circumstances. It can get very complicated very quickly and our advisors can help simplify things along the way. We are also focused on providing our clients with resources and understanding about managing their financial situation. This financial education, if you will, ranges from basic concepts to sophisticated investing techniques. The importance of being financially educated cannot be overstressed and is the reason I’m joined here by my guest. I am honored to introduce someone who really understands both what it takes to be a professional athlete and the importance of financial education. Darren Woodson. Darren played 13 seasons for the Dallas Cowboys as safety, and is their all time leading tackler with 1350 career stops. He’s a three time Super Bowl champion and a five time Pro Bowl selection. Darren is often recognized as one of the greatest players to wear a Dallas Cowboy uniform and has been inducted into the prestigious Dallas Cowboys Ring of Honor. In the words of Jerry Jones, the owner of the Dallas Cowboys; for 13 seasons, Woodson was everything you could ask for. Unselfish. Reliable. Dependable. A team player first, and a team leader always. He’s a living, breathing example of the saying that character does matter. Darren successfully made the transition from a career on the field to a career off the field. Following his NFL retirement, Darren joined ESPN as a broadcaster and had a great 14-year run. Since then, Darren has become a commercial real estate entrepreneur. He’s also very involved in a number of community projects, including the Make-A-Wish Foundation and the C5 Youth Foundation of Texas.

Also with us today is Michael Duffy. Michael is a private wealth strategist here at Merrill Private Wealth Management, as well as the Head of Art Planning. In his role as well Strategist, Michael works with our advisors to help with our client’s wealth and estate planning goals. He’s particularly worked closely with our advisors who have professional sports and entertainment clients. Based on his experience, Michael recently helped develop our whitepaper, Wealth Optimization for Professional Athletes and Entertainers, which presents a number of topics that athletes and entertainers should be thinking about as they go through and plan for their future.

[On screen:]

Image of brochure entitled, Wealth Optimization for Professional Athletes and Entertainers

So with that, welcome, both of you. Darren, Michael, thank you both for being here. Darren, I’m going to start with you. You had amazing career as a football player, a broadcaster and now an entrepreneur. Can you take me back to your childhood and your upbringing and how that made you feel about money?

[On screen:]

Darren Woodson

Former Dallas Cowboy, former ESPN announcer

Currently Commercial Real Estate Entrepreneur

Darren Woodson:

Well, first of all, thanks for having me. But, you know, my story starts back in Phoenix, Arizona, on the west side of Phoenix, Arizona. My mother raised four kids alone by herself, no father figure in my house. She worked two jobs and I saw that at an early age. I saw her commitment to our family. And, you know, getting up at 5:30 in the morning, getting home at 11:30 every night. And it was you know, I get emotional thinking about my mother because how of much sacrifice she made for us. And she always found ways to get us to school. She always found ways to make it to practice or get us to practice. She had a process that she put in place for us.

Don Plaus:

So you went to school at Arizona State?

Darren Woodson: Yeah.

Don Plaus: Right? Could you talk a little bit about the impact of playing there made for you, how you got there and what type of impact?

Darren Woodson: Well, my journey is a little different, getting to Arizona State. So my identity when I was a kid and, you know, I have to take you back to as being a kid and playing, you know, Pop Warner football and then into high school, well my journey was, my identity was wrapped in football. That’s what I did. You know, I was a half decent basketball player, I wasn’t tall enough. Baseball, I couldn’t hit a breaking ball. And they asked me about football. And we played football – I had two older brothers. And the easy thing about football was I could tackle people. That was easy for me. That’s what came easy for me. So I always felt like, Well, I can do something in this game. And played there at Maryvale High and then got recruited by a lot of schools. But my issue was my grades. My senior year, I never took grades serious and I had coaches who came in, you know, from my sophomore years on who kept on warning me, you’ve got to get your grades right, because if your grades aren’t right, we can’t give you a full ride scholarship. And I was hard headed, and my senior year came up and there were multiple schools that were looking at me and I was going to have to be what they called back then was a Prop 48. So that meant I had to sit out my first year. So going to Arizona State, I ended up making the decision, I’m going to go to Arizona State, I’m going to go ahead and sit out that first year. And it was my first time since I was seven years old that I missed the football season. And it was then that, you know, I realized that if I don’t do the little things, it’s going to cost me my dream of playing in the NFL one day. And I sat there for an entire offseason and there was the head of recruiting at Arizona State was a gentleman by the name of Don Bocchi. To this day, he is one of my dearest of friends, but he mentored me in that first year where I couldn’t be around the football team. And I think it was a turning point in my life because it was the first time that I was … my identity again, being a football player, now was separated from football. Now I was seeing other things in the community and at school. And Don Bocchi did a great job of introducing me to people, networking me with people. And it was probably one of the first times I saw people do other things outside of sports. And that really gave me a broader perspective of life in general in that football wasn’t just everything. But I ended up taking that time for that year to get my grades right. Got those grades right. And I was ready to go and get back on the football field.

Don Plaus: Wow, that’s amazing and what an impact Don Bocchi had on you, so that’s tremendous. So we move forward to have a great career at Arizona and…

Darren Woodson:  State.

Don Plaus: Arizona State. I gotcha!

Darren Woodson: Come on Don, you gotta get it right.

Don Plaus: Arizona State. And, you know, you go into the draft, the ‘92 draft was a really strong draft and you’re drafted in the second round. And so what that means from an economics perspective, from a money perspective, it’s you know, it should be pretty good. What were you thinking when you got that…?

Darren Woodson: Well, first I just wanted to get drafted. I didn’t care who drafted me. The Cowboys ended up doing that in the second round, I was the 37th pick. I wanted to get drafted. I got there, and in the first time that I was exposed to any type of financial means in my life is when I signed that signing bonus. And they gave me the signing bonus and I looked at it – as a matter of fact, before we even got there, my agent is the one who had the conversation with me of what the number was going to look like, and there were some zeroes attached to that number. And it was more than my mother had probably made in her entire life. And I had no idea what I was going to do with it. All I knew was protect it because my mother was, you know, right on my side, who basically led me through the way of saying, hey, look, when you make this money, there’s no entourage, there’s no family that’s going to be around this. We’re going to hold on to this and do it the right way. And she was always in protection mode.

Michael Duffy: And what I find so amazing about that and then listening to the rest of your story was that when you did get the check, you didn’t go crazy.

Darren Woodson: That’s right.

[On screen:]

Michael Duffy

Wealth Strategist

Merrill Private Wealth Management

Michael Duffy: You had your mom’s values instilled in you. You understood that this was something kind of beyond your skill set and you needed to find other people to take care of it. And so one of the things that I’ve just learned is that especially with athletes, they make their money early and fast when they’re young, right, when they’re at their peak physical condition. And so making a mistake early is okay, but making mistakes later, especially as more money is coming in, can be devastating. And so it’s never too early to plan. And I think the time for planning is, you know, when you get that signing bonus and you’re ready to go, it’s time to talk to an advisor.

Don Plaus: Yeah. How did you do that? How did you find help?

Darren Woodson: Well, we went through a process of, through the NFLPA at the time, they had a list of financial advisors that were out there that were qualified through the NFLPA, who have met the standards for the NFLPA, along with agents as well. So we saw the list. My mother and I went through that list. Don Bocchi helped me as well. And I made the my initial decision with a financial advisor that my former teammate, who was a good friend of mine, had had the year before. Made that decision, put my might, put some of my money with that financial advisor, and then found out that he was skimming from the top on some deals. And even though I went through that process, I still, if I wasn’t looking, if I didn’t have another agent looking at my money, then I would have been in trouble.

Don Plaus: So one’s a financial advisor, one’s the agent. How did the agent help you? What was what was their role?

Darren Woodson: The agent’s role was, you know, I basically wanted to balance out both. I wanted to, you know, the agent, I wanted him to do his job, and he did his job, but he was also a dear friend and was watching everything that was going on, on the financial side and was asking some tough questions. I didn’t have the wherewithal, nor did my mother have the wherewithal to understand what money looked like. Like we didn’t know what to do with it. All I wanted to do, all I did is and this is how plain and simple it was Don, I would look at that statement and I would see the number, and I didn’t want that number to change unless it went up because I wasn’t touching it. So that’s how I managed money back then. And that’s how my mother as well managed me at the same time. So my agent had asked some questions, some tough questions, and found out that my financial advisor was, you know, not on the up and up.

Don Plaus: You know, it’s funny, you know, many people that I’ve read about have turned to family or friends that might not have the experiences or expertise. Was that something that you faced or something you had to navigate?

Darren Woodson: Absolutely, because no one in my family had ever experienced this type of wealth or wealth at all. And, you know, for me, I was the first one in my entire immediate family that made it through college and got a degree. It is a tough decision because I didn’t trust a whole lot. I come from a neighborhood where you don’t trust and I built this mindset of I’m not going to be taken advantage of. And I try to do it the right way, and even going through that process, there are times where you make mistakes.

Michael Duffy: I write a little bit about that in this paper in a section called The Thank You Trap. And what we’ve seen is that as players can rise through the ranks, the people that they trust are the people that they grew up with, right, their friends. And so they’re  the people that usually get assigned these professional roles and they’re not professionals.

Darren Woodson: Right, right.

Michael Duffy: Right? And so you’re asking somebody to help you manage money, to do your taxes, to help you find property and casualty insurance, all these kinds of things that they don’t have the skill sets for. You don’t have the skill sets for. And so at the end, it can be a very profitable engagement thing to do for your friends, but it can really end up hurting the player severely in the long run.

Don Plaus: So, you know, Darren, you had a 13-year career. Most football players on average is 3.3. The amount of time they actually are able to play in the NFL, and so they run into a lot of issues. How do you advise those folks that are under 30 to really protect themselves and to really, you know, take the right financial steps?

Darren Woodson: Well, I think it starts early on and you have to have a foundation. You really do. You have to, one of is that you get rid of your entourage and understand that you are now a business. You have to. And people always say, well, you’ve changed. Well, you have changed. The zeroes have changed and the commas have changed. So you have changed in a lot of ways, but it’s also understanding and just opening your eyes to the reality. When I first came in the NFL, the one thing I saw was veteran players ten years, even two years, two months in the league, getting cut. And it didn’t matter if you’re a rookie, if you’re a four or five-year player, or if you’re in this league for 12 years. I saw players getting walked out the door and when they walk you out the door, that’s it. There’s no turning back and coming back through the door. And that’s coming from an organization with the Dallas Cowboys, which is called America’s Team. When the team let you go, you’re gone. And now it’s time to figure out what you’re going to do for the rest of your life. I think one of the great things that I had, I have an agent by the name of George Bass who’s still in Dallas. George put the perspective in order for me, and it was, while you’re on top, you network and use the star power that you have while you’re on top, while you’re playing in the game. And I watched him as a CFO for a development company be highly successful, and I always wondered what he was doing. I wasn’t one of those guys who just played the game and then said, that’s it. I played the game, but I also watched on the outside and saw Roger Staubach, who was a mentor of mine, and I watched him be successful in business, and I watched George Bass be successful in the commercial real estate business as well. And I knew there was something more to just football. And it was that advice about using your star power while you’re playing and help you network and get to know people – see people want to touch you while you’re playing. And if you don’t open up, if you’re just in a shell, you’ll never know what businesses look like or what’s out there when you’re done playing. Because that day is going to come, whether you like it or not, as a professional athlete, the day is going to come.

Don Plaus: Yeah. So, Michael, that’s one of the things that we think about, right? That short period of time with potentially a lot of income. What other steps would you recommend that, you know, athletes or entertainers take during that period of time?

Michael Duffy: Well, I mean, it’s really important to put money away. And that’s  very, very hard to do when a lot of money’s coming in and, of course, the inclination is to spend it. We have a kind of a rule of thumb that you can plan by and we call it the 50, 30, 20 rule. And what that means is. That you should put away 50% of your money for your needs, paying your bills, 30% for your wants, which kind of your luxury items. So then 20% for savings and I should say that the first box to be ticked off, the first thing you need to do is make sure that you’re putting money away for taxes. So this is a net calculation or net-net calculation you first solve for taxes and then you apply the 50, 30, 20. And if you do that from the beginning, it’s a very nice, easy kind of formula to follow. And so we recommend that new and even, you know, mid-career athletes follow that rule of thumb.

Darren Woodson: Right. And you know, Michael, I want to jump on that, piggyback on that, one of the great things that my financial group did early on was they didn’t just take care of my money – they educated me on money. Right? Taxes were, you just mentioned that taxes were number one and gave me a better understanding. Because when I first got the check, my first few checks, I would always wonder, who is this F-I-C-A? This FICA guy and why is he taking all this money from me, right?

Don Plaus: That’s right.

Darren Woodson: So I went through that education process, but also went through a stringent budget. And as athletes, you play on Saturdays or Sundays or whatever day it is, whatever sport you’re playing, and they treat you like gods and they try to shelter you in so many ways. But in reality, when it comes to your business, for me it was there was a lot of humility in the fact when they put that budget down for me of how much I was going to be able to spend, how we were going to save this, like you have to start all over again, take yourself out of that arena and bring yourself back and have some humility on preserving your wealth. Because again, you’ve got to treat it like a business. And I thought that was one of the great things that my financial group did, was explaining it to me, explaining how much I could spend, you know, where this money’s going, where your taxes are. Having a game plan is immediate. You have to have that at an early age.

Don Plaus: I think understanding exactly what you’re getting and then budgeting thereafter to make sure that you achieve your goals. So the day hits, right? You stop playing.

Darren Woodson: Yeah.

Don Plaus: How do you handle that both emotionally and financially?

Darren Woodson: Emotionally was harder than the financial side because this is something … playing the game of football was something I had been doing since I was seven years old. That transition was really hard in a way emotionally because I was no longer a part of that locker room, and because of my health, I couldn’t get back out there. So there was a frustration, one. And then it was, okay, what do I have to do? What’s next? For me I ended up jumping into TV and doing broadcasting, but again, thinking back and really going back on that day, I didn’t fear the financial side because I had prepped those 13 years living off a budget, networking, knowing that I was going to go into commercial real estate early on, doing internships while I was playing. I kind of knew that… I knew that this was not going to last forever, and I had something that I was going to fall back on. And I think that really helped me as far as my confidence in knowing the path of what was coming front of me.

Don Plaus: That’s great. So one of the new things that we’re dealing with is, you know, students with name, image and likeness, right? And so what advice would you give them?

Darren Woodson: Oh, man, that’s a tough one because, you know, a lot of these students are 17, 18 years old out of high school. And the parents are going to be heavily involved. And who’s the first person you trust? It’s your parents. And I think it’s early on, there’s got to be a process – we got to catch this early. I know everybody talks about, well, in college, we have to get a set of programs or whatnot. And maybe let Merrill Lynch, Bank of America come in and help out. But this is starting in high school now. I think the college system, the high school system are going to have to set up a reasonable education, whether it be financial literacy classes in high school or whatnot. But it has to be not only for the kids, but for the parents as well, to help educate their kids, because the one thing you’re going to do is you’re going to get that money in high school, 17, 18 years old. And I’m going to look to you, Michael, my father, to help me make decisions. And if father’s not educated in that situation, there’s going to be some problems.

Don Plaus: Yeah, that’s good advice. So you’ve been passionate about helping rookies.

Darren Woodson: Yeah.

Don Plaus: Could you talk about why that’s so important to you?

Darren Woodson: I just, you know, I’ve seen it myself. I’ve gone through it early on in my career. I’ve been taken advantage of, but it wasn’t a huge deal, but still I felt like I was taken advantage of. But I’ve also watched players come in and go out and they’re dead broke. They live check the check. They’re trying to keep up with some of the first round picks or guys who have been in the league 12, 13 years. They’re buying cars that they drive off the lot, and they’re depreciating. I’ve had to have some tough conversations with a lot of guys because I didn’t want them to go down that path of being broke when they finished playing. That’s hard for me to say. That’s a hard word for me to say is because you sit there and you watch guys who who’ve  made a lot of money in this time, in this little window of time, maybe it’s five years, maybe it’s ten years. They’ve made a lot of money, but they lived check the check throughout that process and didn’t take care of the little things. One thing I’ve always told the young guys when they come in is, you are a business and you’re starting a business. The first thing in business is that you have to check your overhead. Your overhead is – it can’t be your five or six friends who are your so-called entourage. Things have changed. If you really want to help your friends. Help them with your network. If they need a job, help them with the job. Do not enable them and give them money. That goes for family, friends, moms, dads. That goes for the entire like… you have to run who you are as a business. And if you don’t, at the end of the day, this is what’s going to happen. You’re going to come out at the end of your career and not have that safe landing spot.

Don Plaus: That’s great. Michael, I want to turn back to you. So the financial industry has woken up to helping and supporting both athletes and entertainers. Can you talk a little bit about what you’re seeing by way of education?

Michael Duffy: Yeah. So, you know, I think we have woken up and smelled the coffee and heard the stories about, you know, not just football players, but any professional player living large and not preparing for the future and living in the moment. I love a comment that you made off camera where you were talking about you were you were more than a football player. There’s more there. And so, you know, I think the recognition is that, you know, are these athletes are more than just their performance bonus, their salary. They live on to have long careers. They have multiple sources of income. You know, now they’re selling NFTs. They’ve got endorsement deals. They’ve got intellectual property rights with their name, like and images. And so there’s a lot to get around and it can be really very, very complex. And so they need help. So firms like Merrill put together, you know, we mentioned the white paper earlier, but there’s other tools that we’ve developed to help bring folks that are laypeople in the investment world up to speed so that they can really kind of manage their wealth going forward. And I very much agree with you that it can start as early as high school to get people acclimated.

Don Plaus: That’s great. Yeah.

Darren Woodson: You know, and I want to… I love what you’re saying there because I think there’s part of it that has to be there has to be – there has to be some disruption and it has to happen to players at times. Sometimes it’s good. And I have a financial group that has fired players because they’re not meeting, they’re not sticking to the budget. Players don’t understand. I’m not just saying NFL players, but athletes, entertainers, we have this mind of it’s an arena, right? We’re going to do this and we’re going to win. We’re going to win at all costs. So it’s a strong mindset. In order to handle some of these strong minds, you have to have a strong person that’s representing as well, to show them the way. And it has to be in a way of, hey, this is how it works. Here’s what your taxes look like, here’s the budget and what it looks like. And if you don’t follow the game plan because we’re all used to game plans, if you don’t follow the game plan, then I can’t represent you. You go on about your business. And I think that’s where you start to get disruptive with a lot of athletes is, or a lot of entertainers slash athletes is that when you start to dictate terms to them and show them the game plan is when you can really touch base with them.

Don Plaus: Well, listen, this has been great, Darren, Thank you for sharing your insights and talking about your financial journey. And again, Michael, what you’ve been doing with the rest of the group has been phenomenal. We thank you very much for all that you do. And, you know, again, great to have you both here today.

Darren Woodson: Thanks.

Michael Duffy: Thanks.

[On screen:]

Budget and get to net net

Make savings a priority

Have a trusted team

Plan for the future

Take ownership of your financial wellbeing

Don Plaus: I’d like to leave everyone today with some key lessons that we’ve learned, such as budget and get to the net-net. Make savings a priority so your financial future is better protected. Have a trusted team who can teach you and who you can count on to give you good advice. Plan for the future, which means looking beyond just the now. Take ownership of your financial well-being and thinking of yourself as the CEO of your business. At Merrill, we understand that athletes and entertainers are very different from other investors. Their incomes, expenses and career spans are unique. That’s why we created the Sports and Entertainment group to focus on sports and entertainment professionals.

[On screen:]

Image of brochure entitled, Wealth Optimization for Professional Athletes and Entertainers

We have knowledgeable and experienced advisors to help address your financial needs. Michael mentioned our Wealth Optimization for Professional Athletes and Entertainers white paper as a good starting point to get more information. I’d urge you, if you are a sports professional, a college athlete or a member of their family, to reach out to us or contact your advisor for a copy. We’re here to help. On behalf of all of us at Merrill, thank you so much for joining us. We look forward to hearing from you and meeting with you soon.

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