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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.
Get advice
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.
Get away
When the fit between advisor and client seems good and the windfall is still fresh in their pockets, I advise the recipient to take a trip. It shouldn’t be the vacation of a lifetime – just a few days to clear the head, gain new perspectives, and prepare for the work ahead.
This advice covers the spectrum of sudden wealth owners. The lottery winner needs to recover from the shock of winning. The business-selling entrepreneur, who spent years hunting for the right buyer – a process often capped by long and grinding negotiations – may be coping with exhaustion. Both categories of windfall recipients will feel elated about their financial gains, but may also struggle with the emotional impact of shedding their old sense of identity, whether wrapped up in building a successful business or simply being a regular person with a regular life.
A good advisor will acknowledge and validate the client’s feelings, guiding them through reflection on the way to forward planning. They’ll help the client envision a future life while facilitating discussions about financial goals, personal values, and general aspirations.
Get real
In this process, the advisor walks the windfall client through hypothetical disruptions and their impacts. Examples include macro events like financial crises and personal challenges such as divorce or an elderly parent’s infirmity. Examining these scenarios – aided by software tools designed for the purpose along with insights from past investment performance – can foster realistic and balanced perspectives on financial goals.
The relationship between a client and their financial advisor hinges on mutual understanding. Clients must feel confident that their advisor upholds their best interests, especially those with sudden wealth.
Advisors know that understanding is best developed through personal interactions and a demonstrated grasp of the client’s situation. Face-to-face meetings help the client gauge the advisor’s sincerity and authenticity, fostering dynamic relationships based on appreciation and respect.
Trust your gut
Evaluating an advisor’s sincerity and dedication goes beyond assessing qualifications. It involves personal chemistry and the ability – on both sides – to communicate effectively. Clients only feel comfortable discussing their financial affairs if they can sense the advisor’s genuine commitment to their well-being.
For clients adjusting to sudden wealth, heeding your gut is a big part of this process. A strong, positive connection with an advisor is a vital sign of a reliable partnership in the making.
The importance of trust in an advisor-client relationship should never be underestimated. Moving forward with confidence in investment decisions requires assurance that the professionals involved are devoted to the client’s – and the client’s family’s – financial health.
This level of commitment from advisors ensures that clients can make informed decisions, secure in the knowledge that their financial future is in reliable hands. Especially for those navigating the complexities of sudden wealth, having a trusted advisor can be the difference between feeling adrift and feeling grounded.
Planning and resilience
Clearly, managing windfall wealth requires more than financial acumen. It calls for careful planning, emotional resilience, and trusted advice. Engaging an experienced financial advisor is crucial for setting realistic lifestyle and legacy goals, understanding investment strategies, and managing risks.
In short, a reliable advisor can turn a windfall client’s uncertainty into clarity – and their loftiest dreams of wealth into grounded financial reality.
Jerry Sneed is Senior Vice President and Senior Private Wealth Advisor at Procyon Partners.
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