WHEN THE LIGHTS GO OUT

On and off the ice, Mike Modano is the consummate pro.

After 18 years in the National Hockey League, the fleet-footed Dallas Stars centre ranks as one of its greatest talents--last season, he became the highest-scoring American-born player in NHL history. Long before hitting that number, Modano learned to manage his considerable wealth as deftly as he rippled the twine. He was a model conservative investor.

But the rich and famous get a lot of business opportunities chucked their way. Five years ago--at the peak of his career, earning $ 8.5 million (U.S.) a season--Modano took some bad advice that cost him dearly. He estimates that he lost between $ 3 million and $ 4 million on a series of high-risk private investments in the entertainment industry. "From day one, I was really vigilant and very cautious--just play and keep putting it away," Modano recalls. "After 13 years, I was in a position where I could possibly take a couple of chances. I felt excited about it."

Modano's story is far from unique. Hockey lore brims with tales of players who were cross-checked by fiscal mismanagement--sometimes their own, sometimes courtesy of agents or advisers (see "He shoots, he scores ...," page 23). Modano, 38, says his loss taught him there's no point in rolling the dice. "Our cash flow as professional athletes doesn't last forever, and you need to just let it be and take care of itself."

Investors can learn many lessons from Modano and his peers, whose odd set of financial circumstances present a challenge to even the canniest wealth manager. NHL greenhorns may be young men holding down their first real job, buying their first car and house, and acquiring a taste for stocks and bonds. But their investment needs have much in common with those of wealthy non-athletes twice their age. For both groups, retirement is just over the horizon. The average NHL career lasts a mere five seasons, and an exceptional run rarely extends beyond 15. Hockey players need a nest egg they can draw on for 50-odd years, versus 20 for the typical retiree.

Even with league salaries averaging $ 1.9 million last season, putting away enough for a comfortable retirement is easier said than done. Many players still rely on an outdated support team of beer buddies, local bank managers, parents and agents to help them run their money. In most cases, these people are way out of their depth, if they have any financial background at all. Players who defer to unqualified and occasionally unscrupulous advisers--or get lured into lavish lifestyles they can't afford--risk winding up with little to show for a career of fat paycheques.

It's something that wealth manager Stewart Gavin, a former NHLer who now crafts defensive financial game plans for pro hockey players, has seen all too often. He tells a tale of one high-priced free agent he tried to land as a client last summer--only to find out the player planned to entrust his riches to his bartender, who was starting up an investing business on the side.

"For an athlete...the focus is on being the best they can be on the ice, to perform and to advance their career. A lot of times, the rest of it doesn't matter--there's no interest," Gavin says. "It's easy to go out and just buy an $80,000 or $100,000 car because they can. Is it the most prudent decision? No, probably not. But you think you're invincible, it's going to last forever, you've got a lot of money and you don't think of the implications."

Gavin's pay package wasn't quite so generous during his 13 NHL campaigns, but the 48-year-old knows what it's like to feel reckless. The Ottawa native remembers inking his first contract with the Toronto Maple Leafs at age 20--$55,000 a year, plus a $ 20,000 signing bonus he was itching to spend. But when Gavin ripped open that bonus cheque, he discovered to his horror that it was just $ 12,500 after taxes. "You started to realize, 'Jeez, I thought I had more, and it's already gone.'"

This early disappointment spawned an interest in the financial side of pro hockey that the right winger parlayed into a second career. After a serious knee injury forced him to hang up his skates in 1993, Gavin eventually found work as senior vice-president at a Bay Street wealth-management shop. Then, in 2003, he went back to hockey by launching Gavin Management Group. "I knew there was a large need," he says. "I just wanted to do something that would really protect the players and make sure they maximized their financial success while they played."

Atop the Air Canada Centre in Toronto, Gavin Management works with about 30 hockey players, from young minor-leaguers to established NHL superstars such as the Calgary Flames' Jarome Iginla and Eric Staal of the Carolina Hurricanes. Hockey players make up about 60% of the firm's clientele; the rest are high-net-worth corporate executives. Gavin and his six-member team do traditional portfolio and cash---flow management, but their services also run to lifestyle advice, insurance needs, estate planning and tax strategies.

The basic investment philos-ophy is capital preservation--focused on saving, modest returns and little exposure to downside risk. In exchange, the firm collects an annual fee that starts at 1% of assets under management and declines as the client's asset base grows. There's also a consulting fee for non-investment services, which in--clude a fair bit of hand-holding.

This conservative approach is the norm for pro-athlete wealth managers, who know their clients don't have much room for error. Steven Conville, Markham, Ontario-based vice-president and associate portfolio manager at Blackmont Capital Inc., does financial planning for a handful of NHLers. He uses a "dog years" analogy: A single lousy year for a hockey player equals seven for a less time-strapped investor. "You don't really realize how much damage that one bad year has on that player's future until after they've retired," Conville says. "You make three or four of these mistakes and you're broke."

Jarome Iginla has lived by the Gavin system since 1996. The Calgary Flames superstar began working with Gavin as a 19-year-old rookie, when Iginla was naive about finance and worried about making the same mistakes as many players before him. The two met through veteran centre Dave Gagner, Iginla's linemate, who had played with Gavin a few years earlier in Minnesota. "I could tell [Dave]was into the financial side and watched that stuff," Iginla says. "He told me he had this friend, Stew, who would be a good guy to meet."

Iginla, 31, now earns $ 7 million (U.S.) a year patrolling the right wing for Calgary. But he's careful with his money--a trait inherited from his Nigerian immigrant father and his single mother, who raised him in a modest suburban household in the Edmonton area. Ever since Iginla entered the league, he has tried to avoid the flashy extravagances and big-spending ways that have been the Achilles heel of many wealthy pro athletes.

Well, except maybe that car. By his second season, Iginla was wrestling with the urge to yield to his one great young-and-rich temptation: a Porsche 911. It would set him back $ 115,000. "I had read and heard stories of players blowing their cash on spur-of-the-moment things and leaving the game not set up for their future," he says. "So purchasing the car was a big decision for me."

The young Iginla nervously took the idea to the two people who served as his financial conscience. He was surprised when his dad, Elvis, encouraged him to buy his dream wheels. Getting past Gavin took some tighter checking. The money manager gave his consent, but he explained how splurging on the Porsche would affect Iginla's financial goals. "Being able to see the long-term plan helped me feel good about my purchase and enjoy it more," says Iginla, who still uses this method for big-ticket items.

As he does with all his clients, Gavin started out by devising a financial forecast for Iginla--a blueprint designed to ensure he can retire from hockey with enough wealth that he'll never have to work again. Over the years, Iginla's financial plan has been adjusted to incorporate a family. He married his high-school sweetheart, Kara, in 2003, and the couple had their third child this summer.

Every off-season, Gavin sits down with Jarome and Kara for their annual financial report--a three-hour review that measures their current status against the master plan. The Iginlas receive quarterly performance reports on their investment portfolio. They also keep in touch with Gavin and his associate, Matthew Bacchiochi, throughout the year by phone and e-mail, to discuss any financial issues that arise. These might include investment ideas, business opportunities or large purchases.

Bacchiochi says that for forecasting and planning purposes, Gavin Management assumes a client's playing career will last about eight years. "We try to construct a plan whereby he would accumulate a sufficient pool of capital to finance his lifestyle without eroding the principal," he explains. "With our long-term forecast, we can generally illustrate that if a player exhibits reasonable cash-flow management and has an average career, an after-tax return of 6% will allow him to achieve financial independence."

For players early in their careers, the portfolio begins as a glorified savings plan, weighted heavily toward short-term money-market instruments. As a client accumulates more to invest, Gavin and Bacchiochi gradually add longer-term fixed-income products, equities and alternative strategies such as hedge funds and private equity. Gavin estimates that a typical player will need to accumulate a liquid capital base of at least $ 3 million in order to maintain his lifestyle after retirement.

A portfolio for a fairly young player--Bacchiochi uses the example of a three-year pro who still earns below the league average--would look shockingly defensive to the average investor in their early 20s. More than half of the player's money would be in cash and fixed in-come, 25% in long-term growth equities and 20% in al-ternative assets.

On the other hand, Iginla's portfolio is consistent with what Bacchiochi prescribes for "a player who has meaningful net worth and could conceivably be considered financially independent." Its equity weighting approaches 50%, balanced by 25% in long-term bonds, 15% in alternatives and 10% in cash.

Bacchiochi says his firm emphasizes cash-flow management and diversified portfolios. To achieve the latter, Gavin Management favours exchange-traded funds and managed products such as mutual funds and segregated funds, with in--di-vidual securities usually representing only 5% to 10% of the portfolio. It also invests across industry sectors and uses alternative assets--which don't typically correlate with movements in the equity markets--for additional downside protection.

Over at Blackmont, Conville's approach may be even more conservative. His standard allocation is 60% in fixed income and 40% in globally diversified blue-chip stocks. "It's really about just quietly growing," Conville says. "What we do is not sexy."

While Iginla's portfolio fits the low-risk mould, he says he's proudest of his more aggressive holdings. In particular, he likes the Sprott Hedge Fund II, which has earned an average annual return of 13.2% since its August, 2002, inception; and the Acuity Canadian Small Cap Fund, which has averaged 12.3% since its inception in July, 2005. Iginla also keeps 5% to 10% of his portfolio to manage by himself and experiment with his own investing ideas. He has some real-estate investments, but they're a tiny fraction of the mix.

"When I first got into the league, I definitely was risk-averse. I really couldn't imagine seeing money go down," Iginla says. "But as the years go by...you get more of an understanding that that's all part of it: Do it right and it will work out long term. But I still would say I'm a conservative investor."

The same goes for Iginla's lifestyle, though his penchant for sports cars remains. (He now has two, the Porsche and a 2007 BMW M6, but plans to trade them in for a 2009 Porsche Turbo.) He and Kara have a house in Calgary and a summer home in the Okanagan, a popular vacation region in central British Columbia. Last year, Iginla bought a 12.5% interest in his junior-hockey alma mater, the Kamloops Blazers, as did several other former Kamloops players including NHL stars Mark Recchi, Shane Doan and Darryl Sydor. He also dabbles in the restaurant business: He co-owns a small bar and restaurant with some friends--it long ago paid for itself--and shares a Dairy Queen franchise with family members. That's about it.

"I hope to play until I'm 40 years old or somewhere around there, so hopefully I have 10 more years left," Iginla says. "Then I'll have more time to put into [my investments] and can watch things more closely. But right now, it's more about capital preservation."

That might sound like a dull way to spend your millions, but as Iginla and Modano both know, it's the ticket to financial freedom long after the cheering ends. "Once a guy is making $1 million a year...it's really more a matter of what you don't do," Conville says. "When they're in a mall when they're 60 signing autographs, I want it to be because they want to, not because they have to."

HE SHOOTS, HE SCORES LOW ON FINANCIAL SAVVY

Time and time again, pro hockey players have proven themselves to be clumsy stickhandlers when it comes to managing money.

In 1976, the legendary Bobby Orr hit the jackpot with a $3-million (all figures U.S. currency) contract to defect from the Boston Bruins to the Chicago Blackhawks. But by 1980, the blueliner was near bankruptcy, owing hundreds of thousands in back taxes and legal and accounting fees. This mess led to his acrimonious split from his long-time agent and friend, the notorious Alan Eagleson. Orr's ordeal remains hockey's No. 1 cautionary tale about entrusting your money to the wrong guy.

More recently, New York Islanders great Bryan Trottier filed for bankruptcy in 1994, with assets of $141,000 and a staggering $9.5 million in debts. His undoing was a series of failed real estate investments, in particular a costly ice-rink venture that folded.

Then there's forward Darren M c Carty , whose 2006 insolvency saw him report assets of $1.9 million and debts of $6.2 million. McCarty had been earning more than $2 million a year with the Detroit Red Wings, but after he went a year without pay in the 2004-'05 NHL lockout, the team dropped him for salary-cap reasons. He then signed with the Calgary Flames for less than half his previous income. The pay cut--combined with a divorce, casino debts and bad loans to gambling buddies--left McCarty deep in the hole.

But the poster boy for pointlessly wasting a hockey fortune is Orr's ex-teammate Derek Sanderson .

The flamboyant centre was once the highest-paid player in professional sports. For jumping from the Stanley Cup champion Bruins to the Philadelphia Blazers of the upstart World Hockey Association in 1972, Sanderson secured a $2.65-million salary--paid up front. It was an astronomical sum for the time, but not so much that it couldn't be squandered.

Sanderson sat down with financial advisers after landing the contract, but he says they baffled him with investment jargon. "I said, 'Just make sure I don't go broke,' " he recalls. "And never paid attention to it. I gave my lawyer power of attorney. That was my first mistake."

Within a few years, all the money was gone--wasted on drugs, spending sprees, fair-weather friends and silly investments. Sanderson was broke and homeless. But after sobering up in 1980, he became a financial adviser himself. The 62-year-old Sanderson now works with Howland Capital Management in Boston, where he has about 20 NHL clients, including veterans Keith Tkachuk and Glen Wesley.

"Now I have two children and I think, 'God, if I only had the money for them,' Sanderson says. "If I'd just managed it properly, if I hadn't been so foolish--those are the things I try to teach the players." - D.P.