Big money comes with no guarantees for prospects
By CARLOS FRIAS
Atlanta Journal-Constitution Staff Writer
A month ago, he was sweating final exams and senior projects at Wheeler High in Marietta. Today, if things go as hoped, this 18-year-old outfielder could become a multi-millionaire.
In today's Major League Baseball amateur draft, he has an outside shot of being selected No. 2 overall by Tampa Bay, and most scouts believe he will be picked in the top 10, assuring him a signing bonus worth millions of dollars.
"It's extremely weird," Hermida said. "I might go from having 20 bucks in my pocket to a million dollars in the bank. It's very fairy tale-ish."
If that happens, not only can Hermida forgo his college scholarship to Clemson; he effectively becomes the sole commodity of a multi-million dollar company that is him. And, he could grow to the potency of a blue-chip firm (Cal Ripken) or burn hot and fade away like a trendy dot-com (John Rocker).
For the future of a baseball prospect is uncertain. Baseball America, a publication that specializes in tracking amateur ball players, found that of all first-round draft picks from 1965 to 1995, less than half (48.7 percent) went on to play in the big leagues for more than three years.
While playing in the majors is a dream for many, and first-rounders will strike it rich -- last year only two players taken in the first round signed for less than $1.1 million -- the smart ones plan for the reality of life outside of baseball.
Unlike NBA or NFL contracts, where first-round players sign multi-million, multi-year deals, a baseball signee's bonus is a one-time shot. For the time he is in the minors, a player's monthly salary starts at $850 a month and tops out at about $1,600 a month after several years.
Compare that to the Falcons' first overall pick, Michael Vick, who signed a contract that would keep him employed for up to six years in the NFL at the sum of $62 million.
With a baseball player, if the call up to the majors never comes, that rich bonus will have to be invested wisely so the player can go back to college or start a business and begin a whole new career.
So, grim as it might seem, players enlist the talent of an army of financial advisers who do nothing but prepare for the worst.
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B.B. Abbott, agent to Atlanta's Chipper Jones since 1999, makes a living at teaching how to be stingy.
He counsels high school players going straight to the pros to consider their signing bonus the only major money they might ever see in their baseball careers. So, it better be significant.
"It's got to be life-changing money, because if baseball doesn't work out, are they going to be able to make a living outside of baseball?" Abbott said.
He warns high school players selected in lower rounds to be especially chary. Abbott asks players to look past the glittery $100,000 contract, such as a fifth- or sixth-rounder might be offered, and see that a third will be lost to taxes, anywhere between $20,000 to $40,000 will usually go to a one-time purchase such as a house or car. And the remaining amount will be left for the player to go back to school and start a new career. If the money is not big enough, he suggests prospects look at college as another option.
If a bonus is huge, though, the thinking is simple: invest it and "act like it's not there," Abbott said. Mostly, the money will be invested in low-risk, blue chip stocks and mutual funds that can lead to a player doubling his money in six to 10 years, Abbott said.
"You're talking about being a multi-millionaire by the time he's 28, 29," Abbott said.
Abbott said most "big money" clients can have six to eight people dedicated to managing their accounts.
"We go to extraordinary lengths," Abbott said. "You want to be able to look them in the eye at [age] 25 and know they're secure financially."
* * * * Former Georgia Tech standout Mark Teixeira received a $4.5 million signing bonus as the Texas Rangers' top pick last year (No. 5 overall). took it a step further. His father, John, a former Naval officer and manager in an aerospace company, took a two-year course to become a certified financial planner and handle Mark's finances.
"They earned the money, now you want to make it grow and protect it," John Teixeira said. "You have to be prepared for success on the field not to take place.
"You want to make sure whether he signs another baseball contract or not, he'll have a successful financial future to look forward to."
While super-agent Scott Boras handled Teixeira's contract negotiations, John Teixeira said it always makes sense to have a seperate financial adviser for the sake of checks and balances.
"You ought to get poeple who are professionals in their areas," Teixeira said.
Every other month, like a good financial adviser, Mark and his father examine all of Mark's investments, review their performance so Mark always knows where his money is. Mark, who studied management at Tech, is being groomed to take over as CEO of his one-man company.
"At some point in time, he needs to take on this responsibility," John said. "He's not going to play baseball all his life. ''You want to get to where the athlete is comfortable with and understands his situation."
Those investments can provide peace of mind when something goes wrong, such as when Mark Teixeira partially tore a ligament in his right elbow during spring training and missed 10 weeks with the injury.
"You never know," John Teixeira said.
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That's something B.J. Wallace found out for himself.
In 1992, most baseball folks knew his name. He was the hot pitching prospect out of Mississippi State, who went to the Barcelona Olympics and struck out 14 batters in a game, a record that still stands.
He was the No. 3 selection in the 1992 draft -- before multi-million dollar bonuses were the norm -- and signed for $550,000. He was drafted two spots behind San Diego third baseman Phil Nevin, and three spots ahead of a guy named Derek Jeter.
A year and a half into his baseball career, Wallace went in for minor arthroscopic surgery to clean up damage around his rotator cuff. And that was it. His 92 mph fastball disappeared; he never played in a major league game and retired in 1996 at age 25.
"That stuff happens," Wallace said.
But thanks to smart investing by his financial adviser, Wallace retired with more than $300,000 of that signing bonus remaining. He was able to buy and sell a seafood distribution business in southern Alabama, and is now going back to college to finish up his degree in hopes of becoming a baseball coach. And, his 9-month old daughter, Roxy, already has a college future secure because of her father's investments.
Now, he can give sound advice, as well.
"I'd tell him invest your money and leave it alone; don't touch it," Wallace said. "You want to take care of your money, because when it's gone, it's gone,'' Wallace said. They're there to take care of your money; you just have to listen to them. ''You really need somebody to take care of you because it's a big world out there and it moves real fast."
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The world has moved especially fast for Jeremy Hermida.
He went from being a little town on the map of the baseball world to being a capital city. He was a few scouts' best kept secret until April 9 when his team played Parkview and its highly scouted outfielder, Jeff Francoeur, who like Hermida, has been offered a college scholarship to Clemson.
More than 50 scouts in attendance saw a rare sight in Hermida: a perfect swing, a gun for an arm and the potential to become a fearsome power hitter.
Although his future in baseball appears certain, "You've got to have a Plan B," said his father, Larry Hermida.
The Hermidas have decided if Jeremy decides to go pro, his father wants him to have three separate entities working for him: an agent, a financial adviser and a certified public accountant to take care of the taxes.
"You want them to advise him and teach him," Larry Hermida said. "Kind of like having three teachers instead of one."
Jeremy Hermida feels whether in college or the pros, he will get the instruction he needs to be a successful ball player -- "I've been waiting for this my whole life," he said.
The goal, however, is to eventually make an overnight millionaire into a successful business man. With or without baseball.