A guide for navigating newly created wealth
Finding your way in the land of wealth
Authored by the Merrill Center for Family Wealth®
Navigating new wealth can be overwhelming and challenging. This guide introduces seven individuals who have recently experienced significant financial changes and provides insights into managing newfound wealth effectively. The individuals are Sally, Isabella, Jack, Lance, Allison, Kendall and Dylan.* Each face unique circumstances but share the common experience of adjusting to a sudden increase in wealth.
Sally’s story: Transitioning after loss
Sally, a widow, finds herself managing her and her late husband’s wealth with advisors she did not choose. She feels overwhelmed and unprepared. Sally’s main challenge is finding advisors who understand her needs and can help her make informed decisions.
Isabella’s journey: Entrepreneur to multimillionaire
Isabella, an entrepreneur, sold her thriving business for $100 million. She is grateful but concerned about the impact of wealth on her children. Isabella needs guidance to manage her new wealth and its potential effects on her family.
Jack’s inheritance: Young and unprepared
Jack, in his 20s, inherited $15 million after his parents' sudden death. Raised modestly, Jack feels overwhelmed by the responsibilities and complexities of managing his inheritance. He seeks to honor his parents’ legacy while navigating his new financial reality.
Lance’s dilemma: Professional athlete’s financial future
Lance, an NFL player, has a lucrative career but fears financial instability after retirement. He is cautious about overspending and seeks to make smart financial decisions to secure his future.
Allison’s reality: Middle-class to wealthy spouse
Allison, engaged to a wealthy man, is adjusting to a lifestyle of luxury and responsibility. With a prenuptial agreement in place, she aims to understand and manage the complexities of her fiancé’s family wealth.
Kendall and Dylan’s windfall: Lottery winners’ challenge
Kendall and Dylan won $50 million in the lottery. Their newfound wealth has attracted advisors, charities and requests from friends and family. They struggle to maintain normalcy and make thoughtful decisions about their money.
Common challenges and practical solutions
These individuals face common challenges: complexity, mistrust and decision-making paralysis. This guide offers practical steps to transition from feeling overwhelmed to finding stability.
Identity and emotional challenges
Sudden wealth can cause a sense of dislocation and identity crisis. Even experienced entrepreneurs like Isabella may struggle with managing personal finances. Understanding financial terminology and the purpose behind it is crucial for making informed decisions.
Money scripts and financial behavior
Our beliefs about money, often formed in childhood, influence our financial behavior. Reflecting on these money scripts can help individuals understand their financial decisions and make necessary adjustments. Exercises for self-reflection:
- Explore your money story: Write down your beliefs about money and identify their origins. Assess whether these beliefs are still useful and consider replacing outdated scripts with new perspectives. (Download a copy of our guide for this exercise.)
- Identify your money style: Recognize tendencies like overspending or denial. Understanding your dominant money style provides greater control over your financial life.
Building capacity and competency
Developing financial skills and surrounding yourself with knowledgeable advisors is essential for managing wealth. A reputable private wealth advisor can serve as a “financial quarterback,” helping to navigate complex issues and develop integrated strategies.
Finding the right private wealth advisor
Consider the following when choosing a private wealth advisor:
- Education and empowerment: Choose someone who will educate and empower you.
- Client experience: Ensure they have experience with clients of similar wealth.
- Trust and loyalty: Look for advisors with long-term client relationships.
- Range of services: Understand the scope of services offered.
- Client-focused: Advisors should prioritize your best interests.
- Transparent fees: Ensure clarity and fairness in fee structures.
- Team experience: Look for a team experienced in managing family wealth.
- Interaction process: Choose a team that offers flexible communication options.
Learning and adapting
As you navigate wealth, your competencies will grow. Learn about investments, estate planning and other financial aspects. Your private wealth advisor should help you understand basic concepts and prioritize your goals.
Territories in the land of wealth
New wealth can feel like immigrating to a new country. You must learn a new financial language, decide on lifestyle changes and develop new professional relationships. Understanding your preferred “territory” in the land of wealth helps smooth the transition.
Eight core principles
- Don't make major decisions immediately: Avoid impulsive decisions immediately after acquiring wealth.
- Gather perspective: Take time to gain insight and avoid oversharing.
- Know yourself: Understand your money tendencies and beliefs.
- Identify priorities: Determine your goals and values.
- Choose companions carefully: Select advisors and friends who support your journey.
- Explore and take risks: Experiment and learn from new experiences.
- Hire the right advisors: Build a team of reputable professionals.
- Build competencies: Continuously develop financial skills.
Conclusion
This guide provides an overview of managing newly created wealth. By reflecting on personal beliefs, understanding financial principles and building a supportive advisory team, individuals can navigate their new financial landscape with confidence and purpose.
* Sally, Isabella, Jack, Lance, Allison, Kendall and Dylan are composite characters, drawn directly from our experience. Identifying details have been changed to preserve confidentiality.
The case studies presented are hypothetical and do not reflect specific strategies that may have been developed for actual clients. They are for illustrative purposes only and intended to demonstrate the capabilities of Merrill and/or Bank of America. They are not intended to serve as investment advice since the availability and effectiveness of any strategy are dependent upon your individual facts and circumstances. Results will vary, and no suggestion is made about how any specific solution or strategy performed in reality.