Understanding the True Value of Professional Advice
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:SignatureTHINKING Planning Understanding the True Value of Professional Advice By Jay Loyd, Senior Planning Associate In today’s world, where YouTube videos, blogs and other online “self-help” methods are readily available, one might wonder, “Why is it that I am paying a professional for something I can learn to do myself?” This thought can apply to services as complicated as tax planning and contract negotiation to seemingly simpler topics such as home improvement. I recently had this thought when I decided to overhaul the landscaping in my backyard. “Why should I pay a professional when I can go online and get tips, find plant recommendations based on my layout, watch YouTube videos about installing a French drain and rent a tiller from my local home improvement store? I’m capable of doing this, right?” Sometimes a question like this can come from a sense of pride, other times from the desire to learn by doing it yourself, and sometimes simply from the lack of desire to pay for something you think you can do yourself. My decision to “ So the question work on my yard stemmed from a combination of the three. becomes, what I did, however, make an important decision early on: I chose mistakes are you to get some guidance. My desire to do most of the work willing to make to myself met up against the fact that I honestly had no idea learn something what I was going to do. So I decided to hire a consultant, someone who could point me in the right direction and who I yourself? Are there could bounce ideas off of. I had no idea that certain types of decisions that you grasses and plants wouldn’t have a chance of growing in my simply can’t afford yard because of important details such as soil quality, direct to get wrong the first sunlight and rainfall. I could have purchased all of the plants I time?” was considering, tried to figure out how to tend to them, and watched in frustration as they died despite my attempts to fertilize and water based on the best free information I could find online! 1230 Peachtree Street, NE Suite 1800 Atlanta, GA 30309 404 253 7600 www.signaturefd.com 1 :SignatureTHINKING The key for me is the adage “You don’t know what you don’t know.” Plenty of people are intelligent enough to figure out things over time, but how can you possibly do everything right the first time? Nowhere online did those videos or guides help me determine the type of soil I had, nor did they send someone out to inspect my property and the slope of my yard, look at the roots of my existing trees and tell me how it all would impact my design. While the information online was sound, it simply wasn’t specific to my situation, and there was no way I could have known the questions to ask in the first place! So the question becomes, what mistakes are you willing to make to learn something yourself? Are there decisions that you simply can’t afford to get wrong the first time? My experience reminded me of a decision that was made recently by an NFL offensive lineman, Russell Okung. After playing his first six seasons with the Seattle Seahawks, Okung found himself a star player in the prime of his career entering free agency, with the ability to choose where he wanted to play and stipulate the terms of his contract. What more could you ask for? Why is Okung unique? After all, there are hundreds of free agents in the NFL every year. What makes Okung’s free agency different from the rest is that he chose to negotiate his new contract on his own, meaning he had no experienced agent representing him. What motivated Okung to do this? We may never know, but what we do know is that nearly every other player in modern history has used an agent, a specialist whose job is to ensure that your interests are represented at the time of negotiation and that you receive the contract you deserve. Perhaps Okung wanted to see if he could do it himself for the pride and sense of accomplishment. Maybe he wanted to save the commission that a traditional agent would receive (2–3% of the contract), which, given the size of NFL contracts, isn’t insignificant. Only Okung knows. So what happened? After discussing preliminary terms of a contract with a handful of teams but without agreeing to anything, Okung signed with the reigning Super Bowl champion, the Denver Broncos. News came out that Okung had signed a $53 million contract. Not bad for doing it himself. Who needs an agent after all? Or so we all thought. Pretty quickly details began to leak about the structure of the contract, and let’s just say these details were not in Okung’s favor. How can these details be so important? A contract is a contract and money is money, right? In the NFL and other professional sports, this isn’t necessarily the case. Often, agreements are made between a player (or the agent) and the team where everyone understands that the likelihood of the contract being played out until its conclusion without any changes is unlikely. Teams may guarantee only 30–50% of the contract’s overall value, meaning that if they choose to cut a player before the contract has been completed, they escape paying a great deal of the compensation that is scheduled to be paid in the future. Or if they need to restructure the contract for salary cap purposes, they are essentially able to wipe the slate clean and start fresh at that time. So when the details of Okung’s deal were revealed, it wasn’t too surprising that the entire contract wasn’t guaranteed—that was actually to be expected. What was surprising was just how little was guaranteed: Nothing! Not a single penny. What was originally thought to be a five-year deal worth $53 million turned out to have no guaranteed money whatsoever. It is essentially a one-year “prove yourself” contract, with a series of options that the team controls over the next four years. 1230 Peachtree Street, NE Suite 1800 Atlanta, GA 30309 404 253 7600 www.signaturefd.com 2 :SignatureTHINKING Some may argue that an agent may not have been able to get more from another team given that Okung’s previous season ended with an injury. What is surprising is that in taking the deal, Okung restricted his own ability to sign with anyone else for potentially four more years after he proves himself! In theory, he could have signed a one-year contract with the same terms and then had potentially 29 more suitors available to offer him a new contract should his performance in year 1 warrant it. Additionally, there are no signing bonuses that compensate Okung now, which are commonplace in the NFL and could have easily been included here. The contract he negotiated essentially allowed his employer the opportunity to get a free look at him before deciding whether to keep him. The lesson here is that while Okung has the ability to play left tackle in the NFL, and knows how much comparable players at his position earn thanks to contracts being public knowledge, his understanding of the details required a completely different skill set. It is hard to know what exactly Okung may have missed out on in these negotiations, but you would have to conclude that an agent could have justified their 3% commission by focusing on details such as upfront bonuses and performance bonuses based on milestones. It is too early to tell how this will end up, but we do know that Okung’s options are limited, that he is potentially under team control for the next five years and that there is nothing he can do about it. Maybe it will work out for him and the commission he saved (potentially $1.5 million over the life of the contract) can serve as payment for representing himself, but what happens if it doesn’t? What would you have done? Would you rather have paid for experienced representation to ensure guaranteed pay and flexibility in the future? Whether it is in high-profile employment negotiations or home landscaping, we live in a world where specialization will continue to dominate. There will always be someone who can provide services for you better than you could do them yourself. You can certainly spend the time to become competent in those areas, but any one hour you devote toward them is an hour you could spend becoming an expert in something you are passionate about. So the question becomes, do you want to be a jack of all trades and a master of none? Or would you prefer to spend your time, talent and resources focusing on your career or passions and delegate the rest to those best suited to handle it? 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