How would you react if, when checking your lotto ticket numbers while warming up your car, you realized you won $70 million, the largest lottery prize in Canadian history?
That’s what happened a few days ago for an Ontario resident. After overcoming the shock of seeing the ‘Big Winner’ words on his mobile phone, Adlin Lewis rushed to the local prize office. “I’ll be making some investments, taking many trips and enjoying life,” he said.
While many of us would gush with ideas for spending this mountain of money – before quitting our jobs and striding into the Ferrari dealership – Greg Newman of Scotia Wealth Management’s ScotiaMcLeod team has clear advice for lottery winners, or any recipient of a cash windfall, to ensure their good fortune creates lasting happiness.
“I’d congratulate them on being given the ability to enjoy wealth forever, for themselves and their future generations, as long as they properly manage it,” says Newman. As a Senior Wealth Advisor, director and portfolio manager, he often meets newly wealthy customers, many of whom have sold a successful business or received a sizable inheritance.
With 22 years of experience in the wealth industry, Newman is enthusiastic about building detailed plans to help these customers tackle suddenly relevant issues, which can involve working closely with other in-house specialists on considerations such as taxation and estate planning.
Newman admits those details may sound a bit dull when many instantly wealthy persons may just want to invite everyone they know on a champagne-spraying Caribbean celebration. His response: “This is a wonderful moment, so do some victory laps – maybe have a few good nights where you buy the rounds of drinks – but you must quickly get smart and sober about your next steps.”
He acknowledges that level-headed thinking is not easy, since most people are not equipped for the complexities of immense wealth, including the impact on relationships, or the sharks who appear when they smell money. “I’d advise someone to slow things down, by putting the money in a high-interest savings account and talking to their bank rep to find a really good financial advisor to design a strong financial plan,” he says.
Although you might feel the immediate, emotional urge to dole out generous gifts to family, Newman suggests taking your time, to ensure you don’t make a dent in your capital: “You can tell loved ones that, ‘I want to give you this or that, in a year or two,’ once you have a handle on everything and you can see the interest and dividends coming in.”
Newman would then urge the novice millionaire to put a lot of work into finding an advisor they can trust. He suggests meeting top financial advisors, including those at the major banks, who have a professional obligation to do what’s best for their clients. Interview advisors who are highly experienced at managing sizable assets under administration, with the best track records of performance, safety, integrity and oversight, and the ability to deliver the full range of services you may require.
It’s important to locate this caliber of expertise since it’s remarkably easy to squander a fortune, when you consider the many professional athletes and musicians who have burned through millions due to reckless spending or making foolish investments or loans.
“I know it sounds ironic to tell someone with $70 million, but you can make yourself miserable for the rest of your life if you waste your wealth,” insists Newman.
In contrast, a well-constructed investment portfolio could produce dependable, comfortable income for generations. “A person who wants to manage their wealth for the long-term could definitely achieve significant cash flow with a 60:40 or 70:30 asset mix of equities to bonds,” estimates Newman. “By selecting stable investments, including ones that produce tax-effective dividend income, you could maintain your lifestyle in good or bad markets, and over time achieve nice capital appreciation.”
Newman says the key is to think about the long term. “If you come upon a money windfall, you have a responsibility to yourself to get good advice from the right people if you want the best way of life for yourself and future generations.”
That said, he chuckles as he confesses his probable first decision if he won the lottery: “I’d take all my good friends out for a great steak dinner with fancy cocktails.”
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