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financial advisors for lottery winners

Why millionaires need a plan

By Stuart Ritchie – August 25, 2020

The first time we helped lottery winners was back in 2014.

They’d originally won £13 million.

They felt like they could do pretty much anything.

No worries for the rest of their days.

But like many of the senior professionals we help all over the world.

They were lacking one important thing.

Before I helped these clients, I remember reading about Colin and Chris Weir from Scotland.

They were Europe’s biggest lottery winners in July 2011.

The husband and wife were catapulted into the Sunday Times Rich List above Beatle Ringo Starr and Sir Tom Jones with their £161 million win.

Their dreams had come true.

I also read however, that for lottery winners, statistics show 70% end up broke.

A third go on to declare bankruptcy.

And for many, money doesn’t always equal a care-free life.

(Many famous faces have also taught us this).

Our lottery winners were aged 52 and 57 at the time of their win.

A labourer and bank cashier, living in a modest three-bedroom terraced house.

Their joint income was £45,000.

Having cashed in their ticket.

Their net-worth now resembled many of the successful international professionals we help every day.

But by the time they sought financial advice, they had £8 million left.

£5 million spent.

On a dream home abroad, two new top of the range BMW’s.

Plus six more properties for family and friends.

Even though they were living their dream life overseas.

They were becoming worried, frustrated and anxious.

Like so many who feel uncertain about achieving their ideal future.

They didn’t have a plan.

And without a plan, millions can become thousands in no time.

Nothing lasts forever

Since The National Lottery started in 1994, over 5,000 millionaires have been created in the UK.

But how long do they remain so?

Several winners who have scooped millions of pounds have ended up spending it all with little or nothing to show for it.

When Pete Kyle won a £5.1 million jackpot in 2005, he said it was “like a dream”.

Stunned, the retired Royal Artillery gunner vowed the money was “going to change” his family’s life.

And for a while, it did.

He took his relatives on lavish holidays, bought cars and boats and swapped his home for a luxury five-bedroom mansion boasting a steam room, bar and pool.

But just three years later, Pete was reportedly broke and on benefits.

He had squandered an eye-watering £4,600 a day.

And was now in his retirement years.

While Pete was spending, the costs of goods and services was rising.

He didn’t have a plan to last his lifetime.

No savings or investments.

What if I told you, that for people with 40 years until retirement, £10 million is the amount they should be aiming to save?

That’s a lot of money, by anyone’s standards.

But inflation means £10 million may just about cover a comfortable retirement.

£1 million will have the same spending power as £306,000 today.

£10 million will equal £3,060,000.

Our lottery winners now had £8 million left.

They were heading for financial disaster in their early 70s because they had started to spend their winnings at an unsustainable rate.

Their general spending had spiralled out of control at £280,000 (after tax) per year, as well as one off expensive gifts.

The result if they carried on like this?

They would have to start selling the houses they had bought for family and friends.

And if they kept up their spending and tried to match inflation for 30 years, then their main home would need to be sold too.

Even lottery winners need a financial plan

By carrying out lifetime cash flow modelling , we were able to illustrate the point at which they would actually run out of money .

A example cash flow plan looks like this:

This sobering realisation led to them to follow this three-point plan:

1. Get professional advice

Our clients’ lives had changed forever.

The drudgery of things like bank accounts and wills needed to be sorted.

Not to mention estate planning and tax planning.

It was time to do the maths.

Put their life into numbers.

To partner with a fiduciary who was ethically bound to have their best interests at heart.

Not sell them products they didn’t need or understand.

One who would take the strain and leave them with a feeling of clarity, confidence and control over their ideal future.

2. Plan now, spend later

Most wealthy people talk about their investments, not their spending.

Our lottery winners agreed to stop spending large lump sums and focus on the long term.

It was time to start thinking about the future.

(Theirs and their loved ones, who they wanted to continue helping).

To get back control.

They needed to put their retirement plans into action, while there was still time.

3. Invest systematically

The couple needed a globally diversified portfolio of low-cost investments, within their low risk tolerance.

A clear and simple way to preserve and grow their wealth over the years to come.

Choosing a globally diversified portfolio meant they would benefit from the growth of the entire market.

Avoiding trades that attempted to predict what’s ‘hot’.

(Needles in haystacks).

Once set up, it would be left alone.

Letting the markets work for them.

A lesson you can take from this case study

Investing for the future always makes more sense than spending in the now.

Build your wealth so you can get and keep the life you want.

Spend less than you earn and invest wisely.

Take financial advice while you’re in the strongest position to do so.

Don’t put it off and risk frittering away your opportunity.

If you feeling in any way confused, frustrated, annoyed or lacking a plan, it’s time you got a second opinion.

Because there’s never a better time to sort your financial position out than right now.

This is the true story of one lottery-winning couple who were losing sight of their ideal future, because they were lacking one thing…

Best Financial Advisor for Lottery Winners

As a lottery winner, you are likely to be barraged by tax, legal, and financial issues.

The only method to successfully navigate your way through the complexity is to have a team of experts who are the best at what they do. The question is, who is the best financial advisor for lottery winners? I’ve specialized in financial planning and investment management for sudden wealth recipients for over two decades, but if I won the lottery tomorrow, you can bet one of the first things I’d do is build my advisory team. There is too much at stake not to have the best minds and latest strategies available to you.

So often when I start working with a sudden wealth client months or years after they received their money, I cringe at the tax, legal, or financial strategies they could have employed if only they had better advice. If you win the daily scratcher for $1,000 or if you receive a $5,000 insurance settlement, there are limited options of which you can take advantage. But if your sudden wealth is significant, there is a whole world of options and strategies that can potentially save you not just a little, but a lot of money. How much? I once watched a client write a $15 million check to the IRS for federal income tax. It sounds like a disaster, but if she hadn’t hired a team of experts, that check would have been closer to $25 million. By working with the right specialists, she was able to save close to $10 million of state and federal income tax. If her team had been made of a typical CPA, a general business attorney, and a normal financial planner, she would have left millions of dollars on the table. That $10 million of “found” money over her life could be worth over $100 million if invested. As they say, “A billion here, a billion there, and pretty soon you’re talking about real money.”

The best financial advisor for lottery winners will work with you even before you receive the money.

They will be a critical resource to help prepare you for the money and help you create a comprehensive financial plan. A financial advisor well-versed in the tax and legal aspects of sudden wealth can be an important part of your team – working with and suggesting tax minimization, asset protection, and other advanced strategies with the other members of your team. And of course, once you have received the money, your financial advisor will manage your assets and provide ongoing reporting, monitoring, and adjustments to your plan and investments.

The complaint of many sudden wealth clients is that they are paying all of these experts but that nobody knows what the others are doing – the CPA doesn’t know what the estate attorney is doing and is not aware of what the insurance guy is recommending. This can lead to inefficiency, extra fees for you, sub-optimal planning, and gaping holes in your estate, asset protection, and financial plan.

I’ve learned that in order to create a comprehensive financial plan, somebody has to step up and manage it, but what usually happens is the attorneys and CPA have their heads in the details and the client has to manage everybody and everything. Not only should the client not have to take on this job – especially with what they are paying their advisors – they are often not qualified to know who to bring in or even what questions to ask.

The best financial advisor for lottery winners should not only play a critical role in the early stages of sudden wealth, but I’ve found that they are best equipped to be the person managing the other advisors, coordinating and overseeing the plan, and the person you call first when there is a question. When the financial advisor fills this role, they are called the “financial quarterback” because they see all of the moving parts of the client’s tax, legal, and financial life. They are the ones who can identify when to bring in other experts and make sure all of your financial bases are covered.

But why is the financial advisor best equipped for this role?

Many aren’t, and that is why it’s important to work with a comprehensive financial planner – someone who can provide expertise in the areas of insurance, cash-flow management, retirement planning, taxes, estate planning, asset protection, and investments. It sounds like a tall order, and it is. Most financial advisors are simply not qualified (regardless of what their websites, TV ads, or brochures claim), but you’ll learn how to separate the pros from the amateurs. We suggest you look around, ask for referrals from family and friends, and always hire a fiduciary financial advisor.

Who is the best financial advisor for lottery winners? Find out… ]]>