Did Morgan Stanley’s New Sports & Entertainment Division Miss The Point?

Professional athletes often fall victim to unscrupulous financial advisors that take advantage of players’ trust and inexperience in financial matters. Athletes need to be surrounded by trustworthy advisors who will protect their assets, put their interests ahead of the advisor’s interests, keep them away from the wolves, and work with them to create a long-term plan to secure their futures. Athletes need to invest for safety because they generally have short playing careers and a difficult time earning substantial income after playing sports. They therefore need to preserve their assets and invest conservatively in order to support themselves for the rest of their lives.

In November it was announced that Morgan Stanley Wealth Management launched a “Global Sports & Entertainment Division” and appointed Drew Hawkins to head the newly created division. As explained below, this is a bizarre appointment because Mr. Hawkins has the kind of checkered past that professional athletes should run away from.

According a press release issued by Morgan Stanley, Mr. Hawkins was quoted saying, “Sports and Entertainment professionals have unique financial profiles that do not subscribe to conventional planning. With the resources of the Global Sports & Entertainment division, our Directors are equipped to work with talent and their personal advisors – agents, business managers, family and other spheres of influence – to help make smart choices around how they invest, borrow, protect and give.”

However, according to the Associated Press, in 2003 the State of Massachusetts filed an administrative complaint accusing Morgan Stanley of “contempt” for its customers for pushing Morgan Stanley’s in-house mutual funds, which significantly underperformed the market, onto clients through crude sales incentive programs. In other words, Morgan Stanley gave incentives to its brokers to sell its own underperforming mutual funds to its clients. The complaint focused on the branch office in the Back Bay section of Boston, which was “overrun by contests” to sell the Morgan Stanley mutual funds. Obviously, because the Morgan Stanley mutual funds were underperforming the market, it was not in the clients’ best interest to purchase those funds, but the brokers were given incentives to push them regardless. Guess who was running the show? At the time, Drew Hawkins was the Associate Regional Director.

According to multiple news articles, Drew Hawkins warned colleagues via email, “Please DO NOT put anything in writing via e-mail or fax on the promotional part of our current campaign.” That email from Hawkins seems to show rather convincingly a consciousness that what they were doing was improper.

Given the unique advice, counseling, and protection that professional athletes need over their finances, one must wonder whether Drew Hawkins was the right person to lead Morgan Stanley’s new Sports & Entertainment Division.