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 almost 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. 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 normal financial planner, she would have left millions of dollars on the table. That $10 million of “found” money over her lifetime 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.
Buy 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. 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.