Fiduciary Advice

Assembling Your Wealth Management A-Team After a Windfall

Assembling Your Wealth Management A-Team After a Windfall

After inheriting a windfall, the first step towards protecting your wealth is to assemble your wealth management A-team.

If you are the beneficiary of sudden wealth, you’re probably thrilled–but also potentially nervous about how to handle your money. You don’t want to make a mistake and owe a significant tax bill, purchase bad investments that quickly lose value, or overspend on luxury items you don’t really need.

What you do need is a team of highly qualified professionals who have your best financial interests in mind and can work with you to properly oversee your newfound wealth. After inheriting a windfall, consider these four financial experts who can provide you with the knowledge and advice you need.

A Qualified Fiduciary Financial Advisor

When you are the beneficiary of sudden wealth and need assistance with managing it, a fiduciary financial advisor should be the first person you speak with. An expert fiduciary advisor will work with you to understand your priorities for your wealth and develop a comprehensive plan to meet your objectives.                                                               

Unlike product-driven financial advisors, a fiduciary advisor has a legal obligation to put your best interests ahead of their own. Fiduciary financial advisors generally charge for their services based on a fee-only structure and do not receive any commissions for financial products that they recommend. In addition, they are required to fully disclose any conflicts of interest, must be loyal to their clients, and always act in good faith.

If possible, seek out a financial advisor who holds the CERTIFIED FINANCIAL PLANNER™, CFA®, or other advanced designation. These professionals must pass rigorous exams to demonstrate their knowledge and are typically held to the highest ethical standards.

A Knowledgeable CPA With Understanding of Tax Laws

Next on your wealth management A-team should be a Certified Public Accountant (CPA). A CPA is someone who has obtained significant experience and educational training in accounting skills, including auditing and taxation. They must pass four rigorous exams and usually have relevant, hands-on industry experience.

A CPA can advise on tax issues related to inheriting a windfall. They can also recommend strategies for reducing your potential tax liability. In addition, CPAs can coordinate with your fiduciary financial advisor to ensure that any wealth planning initiatives consider the potential tax ramifications.

An Informed Estate Planning Attorney

As a beneficiary of sudden wealth, it’s imperative to appoint a good estate planning attorney as part of your wealth management A-team. An estate planning attorney is a licensed legal attorney who can advise you on how your assets will be valued, dispersed, and taxed after your death.

In addition to probate advice, they can assist you with the following:

  • Creating a will
  • Designating your beneficiaries
  • Establishing a power of attorney
  • Finding ways to reduce estate tax where possible
  • Setting up trusts to protect your assets

In addition, estate planning attorneys may act on your behalf in case of disputes. They can also ensure your will is carried out according to plan when the time comes.

A Trustworthy Private Banker

Lastly, some beneficiaries of sudden wealth choose to enlist a private banker to help protect their assets. Many large financial institutions offer private banking as an enhanced service for high-net-worth clients.

Private banking often gives you access to a dedicated personal banker. You may also receive discounts or preferential pricing on certain products and services. Private banking may be appropriate for some inheritors of sudden wealth. Still, it’s important to note that private banking usually isn’t an adequate substitute for a full-service, fiduciary wealth manager.

Consider Sherwood Wealth Management for Your Wealth Management A-Team

If you’re the beneficiary of sudden wealth, consider working with a fiduciary financial advisor like Sherwood Wealth Management. Our boutique firm helps clients navigate newfound wealth in a supportive environment where your interests always come first. In addition, we help coordinate all aspects of your financial life. We’ll work with the other members of your wealth management A-team to protect and preserve your assets for generations. Contact us today to schedule an introductory call.

Do You Need a Fiduciary Financial Advisor?

Do you need a fiduciary financial advisor?

It’s often the case that as wealth grows, the associated challenges become increasingly more complex. For beneficiaries of sudden wealth, these challenges can feel brand-new and overwhelming. You may not know who to trust or even what questions to ask. This makes seeking financial advice a daunting task. Fortunately, some advisors have a legal obligation to act in your best interest. In other words, even if you don’t know where to start, they’ll help set you on the right path. Before hiring an “expert” to manage your sudden wealth, it’s important to understand the advantages of working with a fiduciary financial advisor.

Advantage #1: Fiduciary Financial Advisors Put Your Needs First

In its 2019 Financial Trust Report, digital wealth manager Personal Capital found that 65 percent of investors who work with a financial advisor incorrectly believe that all financial advisors make recommendations in their clients’ best interest. In reality, only financial advisors held to a fiduciary standard of care must act in their clients’ best interest. For example, registered investment advisers (RIAs) and CERTIFIED FINANCIAL PLANNER™ professionals must abide by the fiduciary standard.

Indeed, the legal obligation to act in good faith is a significant benefit of working with a fiduciary financial advisor. However, there are related benefits that can help you manage and preserve your wealth over the long term.

Advantage #2: They Provide Advice Rather Than Sell Products

Financial advisors who work for broker-dealers, banks, and insurance companies operate under a less stringent suitability standard. The suitability standard generally only requires a reasonable belief that a recommendation is suitable for a client. In other words, the recommendation can be in line with a client’s objectives and risk tolerance and not be in their best interest.

This difference can be problematic, especially when potential conflicts of interest exist. In many cases, these types of financial institutions incentivize their advisors to sell their products rather than provide objective advice.

On the other hand, fiduciary financial advisors must disclose and minimize all potential conflicts of interest. Even if a recommendation indirectly benefits them, they must communicate the potential conflicts of interest to the client. In addition, they must evaluate alternatives to ensure there isn’t a better option available. This commitment to transparency moves the advisor’s focus away from selling and towards providing unbiased financial advice.

Advantage #3: Their Compensation Is Tied to Your Success

In general, financial advisor compensation includes client fees, sales commissions, or a combination of the two. Therefore, it’s important to understand the difference between a fee-only advisor and fee-based advisor. Only one operates under the fiduciary standard.

A fiduciary financial advisor is fee-only, meaning clients—and only clients—pay them directly for the services they provide. Fee-based advisors, on the other hand, receive client fees but may also get commissions from selling financial products. Since these advisors operate under the suitability standard, they may recommend certain products simply because they pay high commissions.

The benefit of working with a fiduciary advisor is that the fee-only compensation structure helps align your interests. Because it’s common for fee-only advisors to charge a percentage of assets under management, their fees move in the same direction as your investable assets. Therefore, they’re motivated to help you build wealth, not destroy it.

Advantage #4: They Help You Navigate Major Life Events

Life can be unpredictable. Whether you’re dealing with sudden wealth, the death of a spouse, divorce, or a growing family, major life changes can have a major impact on your finances.

One of the benefits of working with a fiduciary financial advisor is that you can lean on them when the unexpected happens. In addition to overseeing your finances when you’re focused on the other areas of your life, they can help you develop a financial strategy for your new circumstances. They can also help you set new goals as your life changes and evolves.

Advantage #5: Hiring a Fiduciary Financial Advisor Can Help You Sleep Better at Night

If you’ve recently come into sudden wealth, you might be experiencing a range of emotions, from anxiety to complete overwhelm. Working with a fiduciary financial advisor can take the burden off your shoulders to make sound decisions with your newfound wealth, so you can sleep better at night.  

If you’d like to speak with a fiduciary financial advisor about developing a plan for your sudden wealth, we encourage you to schedule a call with Sherwood Wealth Management. We’ll help you take the necessary first steps so you can feel more confident about your finances and future.