From Dreams to Reality: Strategies for Managing “Sudden” Wealth

jerry sneedAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

People fantasize about sudden wealth – a windfall of ready money sufficient to solve any problem, a milestone celebrated as the ultimate achievement. It can be a sports star finally getting their “bag,” a multigenerational business selling to private equity, or an entrepreneur beating the odds of creating a valuable business.

But selling your business is like selling your identity: You may suddenly get a windfall of money, but you no longer have a paycheck. Now you bear the huge responsibility of staying wealthy.

The easiest part? You only have to get rich once. The challenge is staying that way.

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Wealth, especially sudden wealth, can be complicated and disorienting. Managing it requires setting realistic lifestyle and legacy goals, addressing its emotional impacts, and understanding financial concepts such as investing and risk mitigation.

The best thing a windfall recipient can do is engage an experienced and reputable financial advisor to help navigate the complexities of new wealth.

At Procyon, we talk to between fifteen and twenty-five windfall recipients a year, typically with $5 million to $100 million in more or less unexpected wealth. Some are athletes and lottery winners, but most are entrepreneurs who’ve sold all or part of a business they spent years building.

Some could see the money coming, and others couldn’t. Some seem equipped to handle it, and others don’t. Regardless, getting the right advice matters. You are not looking for someone to just tell you what to do, but someone to educate you so your knowledge of financial affairs compounds over time. My proudest moments are when, a few years into a relationship, a client asks me what the Sharpe ratio is on a specific fund we are exploring.