Please click here to read Part 1, You Had a Big Windfall: Seven Things to Expect, for some of the emotional considerations that factor into newfound wealth situations.
Now that I have summarized a few things for you and your advisor to keep in mind, let’s discuss what you and your advisor should do if you happen to benefit from the sale of a business, a large inheritance, or winning the lottery.
Celebrate the victory!
You now have a tremendous resource that opens up a lot of new opportunities for you. Your advisor should help you see, understand and shape those possibilities.
Address the lifestyle changes
Be able and willing to talk candidly about the amount of changes that you will be facing in a short time frame. One of the best ways to help you deal with intense feelings of change is to understand that they are both common and natural. It’s important to keep in mind that much of the guilt or fear you may experience is coming from the tremendous change you are going through, and will not be permanent.
Your advisors need to be active listeners in a situation like this. Having a financial advisor who actively listens can be very valuable as you sort out the changes you are facing. Be open with your advisor, and explain how you are feeling about the changes. Make time to have meetings outside of the office, where these conversations may feel more candid and relaxed.
Tackle the little stuff
Have your financial advisor tackle little tasks for you. These can include paying tax estimates, setting up monthly distributions, calling attorneys and coordinating with your CPA. Your advisors may not see these as significant things, but—to you—these items are often new and seemingly daunting areas that create needless anxiety. Don’t be afraid to tell them, as they should be willing to listen and help.
Demand that your financial advisor educate you
Many clients express a desire for their advisors to take care of the financial stuff for them. It is important for advisors to fight the temptation to do that. The goal is that you, the client, are actively involved and understand the strategies that are developed and implemented.
Share information that may affect your planning
It is just as important for you be transparent with your advisors as it is for them to be transparent with you.
What are some things you and your advisor should take a look at?
- What income your family will need and when you will need it
- What risks you can or want to take
- Who controls your resources
- Where your assets are physically held
- Why a certain allocation fits better for your individual financial situation
- What tax factors matter to your family
- What factors need to be managed
- What kind of investments you are comfortable using
These are just a few of the questions to explore with your advisor to ensure that you understand what you are trying to get out of your relationship. This financial framework can then become the raft for you to use in the changing sea of financial decisions and opportunities you will face in the future.
Stick to your financial framework
Anything that is inconsistent with this framework should be rejected unless you consciously agree to change your approach. This method provides you with a solid foundation that can dramatically help you to quickly assess and eliminate the constant waves of financial pitches you will likely see or hear. In addition, this can help you decrease your anxiety, because you have an existing framework of your goals.
Remember the next generations
Your advisor should be willing to be a resource for financial education for your children and/or grandchildren. You may be struggling with the financial complexity that you face and could be concerned about how your possibly less experienced children and grandchildren will handle their individual situations. Have your advisor meet with them to discuss some basics of financial security.
Remember resources your advisor may have
If you need help from other qualified professionals in any field, your advisor most likely has connections and may be able to assist you in finding resources and facilitating meetings with those professionals.
Sudden liquid wealth often creates very significant areas of anxiety. Your financial advisor can be an excellent resource for you if you happen to sell your business, inherit a large sum, or even win the lottery. A significant accumulation in wealth may seem perfect, but remember that there are a lot of other factors that can affect your life after this wealth increase. Understanding and facing those factors can greatly enhance your experience with your tremendous wealth change.