Financial Advisor for Lottery Winners: 5 Key Pieces of Advice


If you only win a dollar or two in the lottery, you probably don't need a financial advisor. Photo by John Carleton.

If you only win a dollar or two in the lottery, you probably don’t need a financial advisor. Photo by John Carleton.

Congratulations. You’ve just won the lottery. After the dopamine rush and mad thrill of it wears off, I bet you’re wondering: now what? Most people who come into a lot of money either have the benefit of a slow build up, allowing them to learn as they go or, in the case of an inheritance, advice from family. Lottery winners have neither and, consequently, they need a financial advisor for lottery winners.

Luckily, I’ve got you covered.

5 Key Pieces of Financial Advice for Lottery Winners

You shouldn't keep your lottery winnings in a jar. Photo by Lisa Brewster.

You shouldn’t keep your lottery winnings in a jar. Photo by Lisa Brewster.

5. Get a good accountant.

After you’ve won the lottery, the most important piece of advice that I can give you is to find a good accountant. Seriously. On a recent episode of Ice Lake Rebels, one of the show’s participants said that he was a refugee, because his country was trying to kill him.

That country? Sweden, he said. They were trying to tax him to death.

Now, I suspect that his taxes weren’t that bad but, as a lottery winner, yours very well may be. Here’s an example: a business incorporated in Delaware will receive a tax bill saying that they owe 70,000 dollars or more. A good tax accountant (or even a Google search) will bring that down to near zero, due to Delaware’s wonky tax calculation system.

A lottery winner can expect the same sort of thing. Here’s one way to think about it: imagine that you pay an accountant a hefty sum, 10,000 dollars, and then he saves you 100k. Was it worth it?

Definitely.

4. Avoid fees.

If there’s one thing I hate more than taxes (and, boy, do I hate taxes), it’s fees. Fees are the devil. They eat into your money, and your profit, and if you let a financial advisor, they’ll bleed you dry with fees. Fees are the worst.

And fees compound over time. Like I pointed out in my post on the true cost of a financial advisor, for a small account, a 1% yearly fee (a typical financial advisor fee) adds up to more than 250k in the long run. For a lottery winner with an initial investment of 10 million, the math is much worse: after 25 years, 1% in fees reduces the absolute value of your account from 54 million to 43 million.

So fees can be worth 11 million dollars, and this sort of thing leads to all sort of perverse incentives (as I pointed out in my post on the types of financial advisors). Lots of brokers and commission-based financial advisors aren’t out to help you, but instead wish to sell you the most expensive junk they can find.

Buyer beware.

3. Invest as much as feasible.

When you win the lottery, there’s a temptation to spend a lot of money on the things that you can now afford, that you couldn’t in the past. You what I call this stuff? Junk. You don’t need a boat or a new car.

You need to invest as much of this money as you can. Let’s say that you’ve won 10 million dollars. Now, let’s consider two people: one who spends 10% of his winnings before wising up, and one who spends 90% before figuring out her finances.

In 25 years, the first guy will have turned his 9 million into about 50 million — not too shabby at all. The second gal, who spent most of her winnings? She’ll end up with about 5 million. So, spending 8 million today will cost you 45 million dollars in the future.

Here’s one way to think of it: take anything you want to buy now, multiply it by 6, and ask yourself if you’d rather have that much money in the future.

If you’re still not convinced, read the story of the Stroh family, who managed to blow 9 billion dollars. If they had that amount invested in very conservative securities, they could have earned hundreds of millions of dollars each year, doing nothing at all. Instead, it’s all gone.

2. Be cautious.

This brings me to my broader point: there is nothing better that a lottery winner can do than be cautious. Think about it this way: you understand less about your money right now than you will at any point in the future. So before making any decision, you should wait until you’re better informed.

I recommend taking well over a month before making any serious decisions about your money. More if you’re patient enough.

This is so important. You’re not in any hurry. You’ve already won. Take the time now to do all of this right. Don’t get tricked into spending all your money on things you don’t need or schemes that won’t pay off. Take it one step at a time.

Be cautious. Postpone decisions. Sleep on it. For a month. Or more.

1. Exercise.

There’s one word that best describes winning the lottery: disruption. Your life is changing rapidly, and this can be extremely stressful. You have to learn competence at and deal with all sorts of problems you’d never thought you would have.

It can feel like your life is falling apart. What should you do about it?

Exercise. There’s nothing better for emotional stability and peace of mind than vigorous cardio.

Want to feel like you’re in control? Get your heart pumping.

Wrapping Up Financial Advice For Lottery Winners

Remember: you’ve lucked out. You have a great opportunity in front of you. Now, it’s up to you to make everything you can out of it. Remember to:

  • Get a good accountant.
  • Avoid fees.
  • Invest.
  • Be cautious.
  • And exercise.

If you’re looking for a financial advisor, make sure that you’re informed on what’s out there. Read my posts on the surprising truth about financial advisor rates, types of financial advisors, typical financial advisor fees, and questions to ask a financial advisor.

Finding a Financial Advisor


Finding a financial advisor is relatively easy, finding the right financial advisor for you, or determining if you even need a financial advisor… Now that is a challenge. There are many types of financial advisors, ranging from tax to investment, from percentage based to fee based, and you will need to look in different places depending on your needs. Prior to reading this article, I recommend reading, 14 Types of Financial Advisors: Managing Acronym Soup, which will help you understand the various types of financial advisors. If you already know what type of financial advisor you are looking for, lets discuss how to go about finding a financial advisor.

Finding a Financial Advisor – Lower-Income

Finding a Financial Advisor

From wikipedia – poverty

Hopefully, you have a tad bit more money than the image above would suggest… Unfortunately, the people who need financial advisors most are likely those who cannot afford them. Take the heavily in debt college graduate, or someone recovering from bankruptcy, they need help managing their finances. For those who do not have a lot of resources, you are in luck! Not only can Top Financial Advisor provide you with assistance, but there are also hundreds of books out there which can help. A few cheap books I recommend:

Although you may have trouble finding an affordable financial advisor if you are classified as “low-income” I do suggest you keep reading. It is always possible to find someone willing to help you in a given situation, and/or have a filmily member or friend help you out. I also recommend the books above, they have provided me with some insight and I hope it will help you as well.

Finding a Financial Advisor – Medium-Income

Those who have a medium income are really those who have the greatest benefit from a financial advisor. Men and women who are already wealthy likely have been accustomed to using financial advisors for most of their life. Where as medium income individuals really need help finding a financial advisor.  If you have a disposable income I recommend first and foremost trying to buy and play Rich Dad Cashflow 101 board game. This is how I learned to invest, and taught my girlfriend as well. Last year I managed to rake in ~$4,000 in passive income (i.e. without working), as a full time college student, all of which came from a single $500 investment (not bad eh?).

I am recommending more or less not finding a financial advisor if you can avoid it. Every penny is important and learning some tricks of the trade yourself can be beneficial, especially when you only have a medium-income. Your investments would likely be roughly the same size as mine, $500 – $5,000.  Just the tax on that is 10 – 40% (depending), then if you have a percentage based financial advisor, you’re pretty much out of luck.

On the other hand, I would recommend investing in a trusted hedge fund or index funds. In other words, do not waste your time trying to find a financial advisor. In other words, spend your time learning about investment rather than trying to find a financial advisor. The caveat being if you are bringing in any investment money you should hire a tax accountant to file your taxes. This will cost you a few hundred dollars to thousands, depending how complicated your taxes are.

Finding a Financial Advisor – High-Income

If (or once) you have a high-income it is best to begin using financial advisors regularly. They can protect you against accidentally breaking a law (for which ignorance is not an excuse), very important. In this case, I recommend simply looking up financial advisors in your area, as a local financial advisor can be more “in-tune” with the laws in your specific county, city or state. Further, remember to ask him/her some questions.

Most importantly, you need a financial advisor to manage wealth. Make sure you have a tax accountant which you go to yearly, and make sure they have a CPA, because they are then legally liable if there is a mistake (rather than yourself). Even better, they can keep the IRS off your back, keep you out of jail, and likely even help you save money on taxes (which is pretty hefty when you reach higher levels of wealth). You can find tax accountants with a simple google search, such as this one.

Beyond accountants you should be able to figure out how to make money on your own, via following the recommended books and games above. It is always possible to hire someone else to manage your finances and “make money,” but you are also losing the opportunity to make more money by learning to be a good investor yourself.

Who Needs A Financial Advisor


Let me preface with the fact that I am a bit bias (obviously), as well as pretty much every financial advisor. We think you need us to guide you. However, the fact is that is only partially true. We want you to want us, but there is only a portion of people out there really who needs a financial advisor.

That does not mean that you wont benefit from having a financial advisor, but there is a difference between needing and benefiting. Everyone can benefit from a financial advisor, they help you keep track of funds, avoid painful IRS penalties, invest widely, manage estates, and much more. However, this article is about who needs a financial advisor, so let’s cut to the chase.

Who Needs a Financial Advisor

Who Needs a Financial Advisor

One of the large sub-sets of people who need a financial advisor, are those who do not have time. Many of us our busy, but we all know (and may be ourselves) those people who simply never quite working. I know personally, I work upwards of 60 hours a week, easily putting in 8 hours every single day of the week. For people like myself, it becomes difficult to manage finances. Who has time to spend hours filing taxes? Not me, instead I pay someone a few hundred dollars to file them for me.

If you (like me) do not have time to file your taxes or manage finances, please be sure to find a qualified financial advisor. Just grabbing any old person to file your taxes can be dangerous. There are heavy penalties for misfiling your taxes and it can cost you thousands of dollars if you make a mistake. For thoughtful questions to ask a financial advisor prior to hire, please read: How to Choose a Financial Advisor in 10 Questions and/or 40 Curveball Questions to Ask a Financial Advisor.

jar-of-money-Who-needs-a-financial-advisor

Another group of people who needs a financial advisor are those who have too much money. You may be wondering, too much money? Is there such a thing? In the case of managing ones financials there definitely is. Imagine if you made two thousand dollars a day, using several sources of income, with various tax levels, and perhaps even different regulatory state laws (depending on the scenario). The point being, managing large financial portfolios can become vary complex on you own, especially with no experience.

Managing taxes and financial accounts of this nature can be handled by a CPA or Certified Public Accountant. Certified Public Accounts are the top qualified accountants and should be used for lager accounts. Since CPAs attach their name to every document/account they work on, if something goes wrong (i.e. someone starts stealing money, etc.) they are legally liable. In other words, CPAs should be the safest bet when you need someone to handle taxes or accounts that are too large to handle for yourself.

Who Needs a Financial Advisor - Marriage

A couple of 14-carat gold wedding rings. Picture taken in Brazil, by Jeff Belmonte

Marriage can also be a group who needs a financial advisor. Marriage is a difficult processes financially. Most of the time two people have to merge both of their accounts into one account. Other times, the couple keeps separate accounts, but merges financially. In even other cases, there is no merging of the finances at all. In either case, the complexities in the marriage process (financially) can be difficult to navigate. Therefore, I would suggest hiring a financial advisor of some kind to help you along the way.

In regard to marriage, financial advisors can offer even greater assistance than just merging finances. Marriage offers a “gold mine” in expense sharing and tax deductions. Hiring a financial advisor to aid you and your loved on in navigating the marriage process will lead to added benefits you may not consider. For example, married couples can share health insurance, you can submit joint tax returns, etc.

Who Needs a Financial Advisor - Home Buyers

Home buyers are a large group who needs a financial advisor. As I have mentioned before, managing estates are one of the major reasons to hire a financial advisor. They enable you to spend less time worrying about the laws, expenses, etc. and allow you to comfortably and confidently buy a home or investment property. There are thousands upon thousands of laws and regulations in purchasing and maintaining an estate.

Even if you are fairly good with numbers and able to manage large sums of money, it would be a good idea to hire a financial advisor when buying a home. The laws differer between Countries, States, Counties, and even Cities. It is important that you hire a local financial advisor to guide you through the process and ensure you save as much money as you can, whilst not breaking any laws.

Who Doesn’t Need a Financial Advisor

To be honest, I could go on and on about this all day. Everyone can use a financial advisor, with the ever growing number of tax laws (currently tax code is over 70,000 pages). However, in many cases they are not required, they just offer an improved method of accomplishing a task. For example, if you have time to file your taxes and are an average American you can use TurboTax, which only costs $40 – $80 and will easily be able to complete your taxes accurately. Essentially, if it is “business as usual” you likely do not need to go out of your way to find a financial advisor.

Only when a unique situations or complex situations, present themselves will you need any form of financial advisor. If you, at any point, become overwhelmed with a particular financial task you should definitely seek financial advisor. On the other hand, if you feel confident, can read and understand the laws, and perhaps are a financial advisor yourself, you clearly do not need a financial advisor. The one clear exception being, buying a house. Everyone should definitely hire a local financial advisor when purchasing a house to ensure all of the city, county and state requirements have been met.