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Morgan Stanley adds to athlete loan program

Morgan Stanley’s fledgling athlete financial advisory group is ramping up its loan program, expanding it to more NFL draftees and opening it to the NBA.

Tales of athletes defaulting on loans have become common enough that Morgan Stanley saw an opportunity to pair a loan program with a financial education push as a way to build a stable of clients. The firm launched its program at the end of 2014, becoming one of the few, if not only, blue-chip Wall Street firms to get into the business with an organized effort.

“There are players that will automatically get loans from agents or other sources at very large interest rates that are attached to them and, quite frankly, at sums they don’t need,” said Drew Hawkins, a managing director at Morgan Stanley and head of its global sports and entertainment practice.

This year, after the NFL draft, Morgan Stanley made fewer than a dozen loans, averaging $55,000, and the loans were paid back within six months, as required. The loans are designed to transition players from college to the pros, and not for luxury items. Morgan Stanley monitors the players’ spending, and the players who took part this year came to Morgan Stanley through financial analysts’ recruiting.

The firm next year expects to make several dozen loans, and larger ones. Before the NFL draft, players projected to go in the first two rounds can apply for loans ranging from $60,000 to $75,000. After the draft, the loans are open to players selected in the draft’s first four rounds and will extend up to $125,000.

In the NBA, players projected to go in the top 15 picks of next year’s draft can apply for loans ranging from $60,000 to $75,000, with players in the final 15 of the first round capped at $60,000. Post-draft, the range increases to $125,000.

Morgan Stanley will use mock drafts from various sources for the projections, and players need to identify three mock drafts that include them in the specific range they are seeking to be considered. Players also are required to sit for a financial education seminar before getting the money.

Hawkins is blunt that the loans are not a moneymaker for Morgan Stanley.

“Quite candidly, our return in terms of what we are making on these loans is little to nothing,” he said. “It reiterates our commitment to financial education and budgeting.”

Morgan Stanley’s payoff would come if the players become full-time clients. To that end, the practice has presented to about 25 pro and collegiate teams on the need for financial education. That effort uses former NBA star Antoine Walker and NFL linebacker Bart Scott.

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