Friday, November 3, 2000
Sudden Money: Managing a Financial Windfall
Most folks would not know what to do with an instant fortune from winning a lottery or scoring big in a divorce settlement. Ms. Bradley, a financial planner, offers broad but brief advice on what to do with a bit pot of money from inheritances, instant success in sports or entertainment, cashing in stock options or getting a large insurance settlement.
All the advice Ms. Bradley offers is sound, but it is cursory. She mentions that one can invest in a bond fund for income, but she neglects to say that many mutual bond funds have fees that are out of proportion in comparison to the modest income they pay; most advisors urge clients just to buy the bonds and save the fees. She notes that sector mutual funds track certain industries without mentioning the relatively high volatility of these funds. Athletes and entertainers get a chapter of their own and special advice: "do not give anyone the power to sign your cheques." All this is wrapped with some psychological advice - "working with a therapist and a financial planner, from the beginning, will help to prevent you from self-destructive spending."
Sudden Money is really a pitch to hire a financial planner. The content has a strong U.S. angle, especially in tax matters where U.S. succession duties have no precise Canadian counterpart. For those who do wind up with a pile of unexpected money, a useful but elementary guide.