If I had a $10 million windfall

I've been thinking about financial advisers with clients holding significant assets. Say, $8 to $10 million. Apart from thinking about the asset-based fees they'd be likely to be charging (wow!) and how a single basis point in fees represents $1,000 a year, it got me thinking about what I would do if I had a windfall of $10 million.

What would I do if I had a $10 million windfall?

From a financial perspective:

  • I'd pay off my mortgage (and any similar debts, if I had any). The interest savings would represent a risk-free, guaranteed, untaxed return I couldn't get anywhere else.
  • I would cancel my personal insurances. With a net worth exceeding $10 million, if something were to happen me, my family would be fine financially. In other words, I can self-insure against premature death or incapacity. There's no point paying premiums to an insurance company for them to take that risk. (There may be some types of insurance I'd consider keeping, including house insurance, third party car insurance, and professional indemnity insurance.) 
  • I'd take my time before making any decisions about purchases or gifts. In terms of gifts, instead of making capital distributions to some of my loved ones, I'm certain that I would settle funds into trusts, with the primary purpose of generating an income stream for them over the courses of their lives. (Even if I were not a beneficiary, I would appoint an independent trustee but would retain the power to appoint and remove trustees to keep them honest.) 
  • With respect to the remainder, much of it would end up in discretionary family trust (primarily for family protection purposes). At least initially, I would keep a couple of hundred thousand in cash or cash-equivalent assets (for living costs, initial treats, and, of course, to buy my second-hand Porsche Cayman), and probably invest in a low-cost, index-based managed fund, with a balanced asset allocation.

As time went on and my wife and I adjusted to our new situation, we would update our goals and this would influence the asset allocation we make.

Apart from the mortgage and the insurance, in all instances we would seek professional advice. Whether that be legal or accounting advice or even financial advice. I'm an AFA, but I would look for an independent pair of eyes to provide objectivity to our situation and act as a devil's advocate, particularly with respect to any major decisions we make. 

Boring? Maybe the financial side of it is. That's often the sign of a good financial strategy. It's far better for other areas of life to be interesting! 

Wealth

Sonnie Bailey

Sonnie is the founder and principal of Fairhaven Wealth.

Before founding Fairhaven Wealth, Sonnie worked in the legal and financial services industries for over a decade.

Sonnie first became involved with financial advice as a specialist financial services lawyer. For many years, he was an “adviser of advisers”, reviewing thousands of advice files prepared by hundreds of financial advisers, and providing feedback in relation to the quality and appropriateness of advice; industry best practice; risk management; and regulatory compliance. He has published work in industry publications and spoken at various financial advice conferences.

Sonnie has also worked with banks, investment management firms, insurers, and derivatives providers.

Sonnie has worked as a private client lawyer, focusing on succession, estate planning and trusts. He ran his own legal firm in Australia before relocating to New Zealand. He has also acted in independent trustee and company director positions.

Sonnie is passionate about helping people achieve their goals and manage the risks to which they are exposed.

He has written extensively on his blog, New Zealand Wealth and Risk, which can be found at www.wealthandrisk.nz.

Sonnie is married to his wonderful wife Chrissy, and has two young children, Ben and Anna.