How to manage sudden wealth

Frequently Asked Questions -

How to manage sudden wealth

Deciding how to manage sudden wealth can be overwhelming, but professional wealth management can help you make the most of an unexpected financial windfall.

Published

28th January 2021

Category

A sizeable financial windfall often marks an important step in life, but whether you’re an entrepreneur, inheriting, or seeing the fruits of a well-executed investment plan, knowing what to do with sudden wealth can be a confusing process. Finding a professional wealth manager who can help you come up with the right plan is an important step to taking charge of your finances.

Sudden unexpected financial gain might come from the sale of a business, inheritance, from accident or injury, or even pure chance (such as a lucky lottery ticket). Dealing with this sudden or acquired wealth can be a challenge, financially and psychologically.

 

How Sudden Wealth Can Affect People

For many, sudden wealth is a cause of celebration and often comes as the result of a great personal achievement. For others it can be overwhelming, especially if it follows a recent bereavement. Some experience Sudden Wealth Syndrome (SWS) where they worry, feel guilty and uncertain; it can affect the trust they place in others. Irrespective of how someone feels about recently acquired wealth, there are certain pitfalls to be aware of.

The pressures that come with acquiring new wealth can cause people to make impulsive decisions, putting them at risk of becoming worse off financially than before. 

Not everyone reacts in the same way, but it’s key to have a clear wealth purpose to make sure you achieve the intended consequences of wealth.

  • Patience and time – Take your time to consider next steps – ignore those who bring instant solutions and request quick decisions.
  • Discretion and confidentiality - Consider establishing a new relationship with experts who are used to dealing with your circumstances.
  • Take the opportunity to celebrate the moment – Immediate short term purchases are fine, perhaps a holiday or some small gifts to loved ones – these types of purchases can help you reframe your thoughts to a more positive place.
  • Personal security – Depending on the level of wealth, you may wish to get help with personal security, not just in the home, but it’s also worth thinking about any public profile you may already have, or may wish to manage as a result of your acquired wealth. 
  • Getting the right advice - Speak to family, friends and professionals about your ambitions. 
  • What is your wealth purpose? Spend it all before you die, use it to educate the next generation, start a legacy for social good… everyone has a different intended consequence and this can change over time. Take the time to consider what is most important to you.
  • Educate yourself on the options open to you – The distinction between education and sales is massive - choose a range of providers but not too many to review your options, with the focus being on education, not making decisions. Develop an understanding of tax matters, investments, estate planning and new significant luxury items you may wish to purchase.
  • Consider the now - Consider what your cash flow needs are - now and in the future. 
  • Communicate with those around you about the decisions you have made so that you can explain your approach.
  • Monitor and manage - Make sure you understand your financial plans and check in regularly to ensure things are working for you.

 

What is Wealth Management?

Wealth management is a professional consultative service that helps address the needs of affluent (high net worth) individuals, with a tailor-made combination of financial services.

A good wealth manager will build a lasting relationship with you, based on trust and a clear understanding of your needs. Talk to Arbuthnot Latham about wealth management, and we’ll create a flexible financial plan designed to help you grow your wealth.

 

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