Receiving a windfall can come in many forms, a lottery win, an inheritance, business sale, or a real estate sale.
In this episode of Conversations on Wealth, host Sarah Widmeyer and Ryan Knipfel, Senior Financial Planner at Richardson Wealth talk about how important it is to have a strategic financial plan if you come into sudden money – either expectedly or unexpectedly – so you can manage your wealth wisely.
Sarah Widmeyer 0:16
Welcome to Conversations on Wealth, a podcast dedicated to helping Canadians navigate the complexities of wealth with a multi-dimensional approach to planning and wealth management. I’m Sarah Widmeyer, SVP and Head of Wealth Strategies at Richardson Wealth. We’ve all imagined what it would be like to win a lottery–wouldn’t that just be grand? And many of us rely on that lottery for retirement plans. What would we do with all that winnings? But depending on which stat you want to believe, sadly, up to 70% of lotto winners lose it all–lose it all… Why? Well, they are more focused on spending than on planning. And your odds of winning the lottery are very, very low. But sometimes a windfall can come in other forms–an inheritance, business sale, real estate sale for example. But without a plan, your windfall can easily slip away. So with that in mind, I’m happy to be joined by my colleague, Ryan Knipfel. He is a Senior Financial Planner, and part of our tax and estate planning team here at Richardson Wealth. Welcome Ryan, and thanks so much for being with me here today.
Ryan Knipfel 1:32
Thanks, Sarah. Pleased to be here.
Sarah Widmeyer 1:34
So let’s be honest, thinking about coming into a great deal of money is something we have all thought about.
Ryan Knipfel 1:41
Yes.
Sarah Widmeyer 1:41
(In) fact, my husband bought me many, many lottery tickets on the weekend, because it was my birthday, and sadly, all we got was a play again.
Ryan Knipfel 1:49
Oh, I’m sorry.
Sarah Widmeyer 1:50
(Laughs) We know, of course, that it’s not always a lottery win. Windfalls can come in other forms, too. It could be the sale of a property, for example, or a large inheritance passed down from hardworking parents. But what’s the first thing we should think about or do if we suddenly receive a lump sum of money?
Ryan Knipfel 1:55
That’s a great question, Sarah. I think if you suddenly receive it, and you’re not expecting it, because I think that’s a that’s a whole other issue. The two things would be (1) not to act impulsively, right away, and (2) potentially, depending on the dollar value involved, maybe keep it confidential as well.
Sarah Widmeyer 2:31
Right.
Ryan Knipfel 2:32
That can be both for your own protection financially, and even, you know, again, depending on the the amounts physically.
Sarah Widmeyer 2:39
Yes. My husband has often talked about if we won the lottery, he would send somebody anonymously in to collect the money.
Ryan Knipfel 2:46
Yes. Yeah, well–
Sarah Widmeyer 2:47
No one would know
Ryan Knipfel 2:48
You hear of people when they’ll win that they don’t go in for weeks and weeks to pick it up, and I think there’s a reason behind that.
Sarah Widmeyer 2:54
Yeah, (it’s) probably a good reason. So as we get talking about the different types of windfalls, of course, we hear all about the statistics about people winning money, winning the lottery, for example, and then a year or two later, it’s all gone. What should people be thinking about when they come into an unexpected windfall?
Ryan Knipfel 2:56
So, uh, you raise a good point in the way you say it that, you know, people will spend all the money and it’s gone, and I think that’s because when you ask someone, you know, “what would you do if you won five or 10 million dollars?” they’ll tell you what they will buy, you know, cars, homes, trips, gifts for relatives, but rarely does someone tell you how they’re going to save it, or the first thing they’ll do is put some away for the next generation. And I think it’s the mindset of what you’re going to do with that money, whatever reason you get it. So I think you have to slow down. I think there’s a number of steps involved. But again, don’t act impulsively. You know, take a deep breath and plan things out. And we can talk about how you might want to do that.
Sarah Widmeyer 3:54
Okay, so it would be hard to keep news about getting a windfall quiet. Um, like I said, my husband jokes, well, probably doesn’t jokes probably means that he would send somebody in kind of unrelated to us to go in and collect it. What are the reasons someone should keep the happy news to themselves?
Ryan Knipfel 4:14
I think I put the reasons in two buckets, there’s the, you know, the actual making sure that you keep that financial windfall, from whatever purpose because there are people out there that are going to try to potentially take it from you, and we hear about cybercrimes all the time now.
Sarah Widmeyer 4:29
Sure.
Ryan Knipfel 4:30
So there’s the ability for people to you know… take it from you that way. And there’s also, you know, people will potentially come out of the woodwork that may exist or may not exist, and there may be the impulse to, you know, help people out, um, spend it on things that, you know, could take a large chunk of it away right away. So I think slowing down taking a little bit of time, I mean, if you want to tell people that’s fine, but again, I think it’s the acting impulsively, both with who you would tell and what you would do with it. I’ve heard stories too, when people will win that, you know, their phone will start ringing off the hook. Because, you know, everyone and their brother now knows they’ve won and I don’t necessarily mean relatives, but you know, other financial institutions or people wanting you to invest in something or you know, help them out with this project, and, you know, depending on your ability to say, no, um, that could really eat into to the principal, if you start getting into those.
Sarah Widmeyer 5:23
Yeah, I think I’ve, I’ve seen in the news, you know, people being targeted for, you know, raising money for bogus cancer, or the health concerns, like “my daughter needs something that isn’t available in Canada. Please help me, please help me.” And I’ve heard some really sad, sad stories.
Ryan Knipfel 5:40
It’s all over and you hear it, but especially with elders these days, but it’s something that again, with the rise of the internet and things being electronic, and especially AI, I mean, I, I you could
Sarah Widmeyer 5:51
Yeah…
Ryan Knipfel 5:51
you can mimic someone’s voice now. So
Sarah Widmeyer 5:54
Yes.
Ryan Knipfel 5:54
I think you really have to be careful. And then do your due diligence around those items.
Sarah Widmeyer 5:58
Yeah, yeah, good things to think about. One of the first rules of managing a large sum of money would be, I think, to get advice. And if there was any other time that I could think more important, there isn’t, this would be the most important time to seek advice. So what kind of trusted professionals should someone consult and who should you surround yourself with, to ensure that you get that right guidance?
Ryan Knipfel 6:28
So I think there’s potentially four different types of individuals you’d want to make sure you had in place, and you know (1) one would be a financial planner, the (2nd) second would be an investment advisor, and then especially depending on the sum involved, (3 & 4) either an accountant and/or a lawyer. And I think that can be either from a financial windfall like you talked about before like a lottery, but they may already be in place, if it’s something like a business sale or some other intergenerational transition of wealth.
Sarah Widmeyer 6:57
So bottom line it’s people that you trust
Ryan Knipfel 6:59
People that you trust I think that have a fiduciary duty to put your interests first. So that comes to as well looking at the reputation and the credentials of the firm and the people involved.
Sarah Widmeyer 7:08
Tell me about fiduciadet–fiduciary, it’s a hard word to say–fiduciary responsibility.
Ryan Knipfel 7:15
I–I love that word. Someone told me about that word with designation they had years ago. And it basically means I think, if you have a fiduciary duty, it means you have to put your client’s interest first. And usually that will be tied to your designation where you are obligated to put their interests ahead of your interests ahead of the firm(‘s) interests, ahead of other people’s interests so that solely you are looking out for them.
Sarah Widmeyer 7:17
Does everybody have a fiduciary duty?
Ryan Knipfel 7:23
(Sighs) I’d like to think everyone has a fiduciary duty, I think, in practice professionals that have designations, lawyers, accountants, people with investment designations, they will learn ethics as part of their credentials, and that will give them that fiduciary duty. So again, I think that’s why it’s important to–to know exactly who you’re speaking with and who you’re looking to for this advice.
Sarah Widmeyer 8:06
So receiving a windfall. Again, it could be lottery inheritance, real estate, business sale, is probably a good time to take another look at your values and your financial goals… “have they changed?” especially if we’re talking about a large sum of money that could completely alter your plans. So what sorts of things should someone think about when it comes to short and longer term goals? And, you know, I’m also thinking about estate planning.
Ryan Knipfel 8:38
For sure. I think there’s a number of timelines involved, and I think of it in terms of, you know, there’s the immediacy, and it’s not to say that you have to save every penny, you’re entitled to spend some things that on things you enjoy that other people may consider frivolous, but there’s the immediate goals or desires, then I would say that during your lifetime, there’s the short, medium and long term desires may be tied to where you are now, where you’ll be up into retirement and then in retirement, and then to your point, if it’s not your goal to spend all this money, or there’s a sum of money involved that you wouldn’t naturally be able to spend, then estate planning comes into play as well because it’s going to be inherited by your beneficiaries, and you one (1) want to protect their use of it going forward, as well (2) as minimize things like taxes in that transfer.
Sarah Widmeyer 9:26
Right. Right. But we get to have a little bit of fun don’t we?
Ryan Knipfel 9:31
For sure. Sure. I have thought too what I would spend my–
Sarah Widmeyer 9:36
Like come on!
Ryan Knipfel 9:37
And everybody has that figure that they know if I win x I can
Sarah Widmeyer 9:40
Yeah
Ryan Knipfel 9:40
retire tomorrow so
Sarah Widmeyer 9:41
Yeah
Ryan Knipfel 9:41
I think we’ve all given it some thought
Sarah Widmeyer 9:43
Is there a percentage guideline like is it 10% you think or is there you know, does it really vary?
Ryan Knipfel 9:50
For myself it’s not a percentage, it’s an amount which probably I shouldn’t share because I wor–I work here.
Sarah Widmeyer 9:50
(Laughs)
Ryan Knipfel 9:55
But I think you need to do a wealth plan and I think that’s getting at something that’s important. When I was growing up, which might date me a little bit, everybody thought a million dollars was a ton of money.
Sarah Widmeyer 10:06
Yes.
Ryan Knipfel 10:06
And it is.
Sarah Widmeyer 10:07
It is.
Ryan Knipfel 10:07
You know, my children who are 18 and 20 told me if they want a million dollars, they’d never have to work, and…
Sarah Widmeyer 10:12
(Laughs)
Ryan Knipfel 10:12
I think they’re gonna have a rude reality check. Um… but I think you, by doing a wealth plan, and specifically the financial component, if you’re talking about the dollars, it will show you, you know, what is that amount? How long will it last? And then you can also run things like sensitivity or scenarios on that to see, you know, what if things don’t happen as we plan, which is often the case.
Sarah Widmeyer 10:35
Yeah, like, what if markets actually don’t, you know, return to the mean, and actually, we go through some sort of world change to, you know, stock exchanges and investing and economic policy, and we actually can’t achieve some of the returns that we’re planning on.
Ryan Knipfel 10:52
And I think you need to be conservative in those projections as well. You know, when I’m working with a client, I like to be conservative, I like to be conservative in what they’re spending. So you might push them on the high end–what they’re earning and rates of return, I use the term realistic, but also conservative
Sarah Widmeyer 11:08
Right.
Ryan Knipfel 11:08
And then you can update the plan every little while, but you want to know where you are now, and more than anything, you want to have the peace of mind once you’ve gone through that process, knowing that you’re going to be okay.
Sarah Widmeyer 11:17
Yeah, well, and I think you just think about what’s happened with interest rates. I think, everybody, not everybody, but many people thought that interest rates would stay at 0%, or near zero forever and ever and ever. But, you know, I know, when we were renewing our mortgage, and they did the sensitivity challenge on the mortgage and said, “Okay, well, if interest rates go to x, you know, this would be the payment.” And I remember kind of thinking in the back of my mind, and I’m in the wealth management industry thinking, “Oh it’s, yeah whatever, it’s not gonna happen, but here we are, and then some.” And so to your point, you really should be planning for realistic interest rate environments, realistic stock returns.
Ryan Knipfel 11:59
Yeah
Sarah Widmeyer 11:59
Yeah.
Ryan Knipfel 12:00
I agree.
Sarah Widmeyer 12:00
Yeah. But you can still have fun, right Ryan?
Ryan Knipfel 12:03
Yes, you can still definitely have some fun, be conservative, have a little fun.
Sarah Widmeyer 12:08
(Laughs)
Ryan Knipfel 12:08
And you can–you can plan the fun into your projections
Sarah Widmeyer 12:11
Right
Ryan Knipfel 12:11
If you’re looking at that going forward.
Sarah Widmeyer 12:12
I think that’s the plan.
Ryan Knipfel 12:12
Not everything has to be saved for your future.
Sarah Widmeyer 12:14
I think that’s the point. So without a plan, then money can be easily eroded, it can just literally slip through your fingers. So what are some of the things we should watch out for to prevent this from happening?
Ryan Knipfel 12:29
So th–there are a couple I call it the erosion of that wealth. And however that wealth has been generated, and I think the key ones could be overspending, improper investment advice, excess gifting, income taxes, both currently and as part of your estate, children, children can be costly as I’m learning…
Sarah Widmeyer 12:48
(Laughs)
Ryan Knipfel 12:49
marital or relationship status.
Sarah Widmeyer 12:51
Yeah.
Ryan Knipfel 12:51
And we talked a little bit about it before but fraud.
Sarah Widmeyer 12:54
Yeah. So in the case of a lottery win, I can imagine then all sorts of people may come out of the woodwork once the news is out there. What are some of the things that we should do to protect ourselves and our public profile?
Ryan Knipfel 13:10
Your public profile, as you mentioned, I think is a big one. You know, personally, I don’t have a lot of social media. But I know a lot of people do these days. And, you know, that can be tied to other accounts, and you maybe have a picture of yourself holding a giant check. And now it’s out there.
Sarah Widmeyer 13:26
(Laughs) Don’t do that. (Sighs) Please don’t do that.
Ryan Knipfel 13:28
I think taking a step back again, not acting impulsively, you know, seeing, you know, what is my social media or public profile?
Sarah Widmeyer 13:36
Yeah
Ryan Knipfel 13:36
Um how should I be managing that? Is there a way to keep some of this news off of a social or public platform? If not, should I be changing or getting rid of some of those social and public platforms, there are actually cybersecurity individuals that can again, advise on this and counsel you on this and depending on the dollar values involved, and even to some extent, you know, lottery winnings when you, we hear about how big they are sometimes in the US, you know, even physical security is something you might want to be concerned about. Telling your children not to run to school and talk about to their teachers and friends about how they won the lottery and
Sarah Widmeyer 13:36
Yeah.
Ryan Knipfel 13:36
having a family conversation that, you know, this is private or confidential, and we’ll deal with it gradually, but you know, please keep the news to yourselves.
Sarah Widmeyer 13:51
Yeah, yeah. For our listeners, I’ll refer you to a podcast that we did a year ago with Scott Stennett on cybersecurity, and I think the cybersecurity is you know, something, I’ll age myself with you. It’s something we didn’t have to worry about when we were growing up.
Ryan Knipfel 14:36
Mmmhmm
Sarah Widmeyer 14:36
But oh my gosh, you know what, I just look at my daughters and how much of their lives they share on social media. There’s no secrecy.
Ryan Knipfel 14:44
No.
Sarah Widmeyer 14:45
And even with the ability to track people and their whereabouts, like there’s just no privacy. There’s no… nothing is left to the imagination. It’s all out there in the universe and probably forever and ever and ever.
Ryan Knipfel 14:58
And being linked to other people on that platform as well, you know, once the information’s out there, it’s disseminated momentarily.
Sarah Widmeyer 15:05
Yeah.
Ryan Knipfel 15:05
It’s everywhere.
Sarah Widmeyer 15:06
Yeah, and you can’t pull it back
Ryan Knipfel 15:07
You can’t.
Sarah Widmeyer 15:07
No.
Ryan, thank you so much for sharing your thoughts with us today. This is such an interesting topic, and it’s one that I think as I said, we all, we all dream about.
Ryan Knipfel 15:37
Yes
Sarah Widmeyer 15:29
And many of us are air quotes “banking on it for their retirements”, which is probably not a great retirement strategy. But, you know, these are really helpful thoughts in terms of managing the news and managing the wealth so that it doesn’t slip through our fingers. Any last thoughts that you’d like to share with us before we go?
Ryan Knipfel 15:47
I think the one Sarah is that, you know, we’ve talked about in terms of unexpected or sudden wealth. And if you look at the main reasons, or main ass–, uh, ways people would inherit or get money, it could be through an inheritance, it could be a lottery winning, it could be sale of a company, a private company, or a significant asset. And when you think about those as the ways people could generate this sudden wealth, a lot of them can be planned for, you know, inheritance depending on your relationship with your family, or you know, your parents or other family members, you can have those conversations to plan for that ahead of time, not only so you potentially know amounts, but you can think ahead of time, you know, what should I have in place to deal with that, and that goes downstream, as well. Educating your children if you know that they will inherit some wealth. Same for the sale of a company. It’s something that’s usually planned and structured with accountants and lawyers ahead of time, so that’s another area where you can put those right people in place for when those funds do become available.
Sarah Widmeyer 16:45
Yeah, wise counsel… I’d like to thank you, Ryan, for joining us today and sharing your experience and advice with us. I think that if any of us come into sudden wealth, whether it’s expected or unexpected, we’ll be much better prepared by listening to this podcast to handle it. We’ve learned with proper planning and the advice of a trusted team, we can make a windfall work for us and for our future without letting it slip away. Conversations on Wealth is available wherever you get your podcasts. Remember to follow us on LinkedIn or Facebook for the latest on wealth strategies. Thank you all for listening today. And join me again next time.
Ready to get started?
Talk to a Richardson Wealth Advisor.
Get the right financial advice you need, whether you’re a new investor, a retiree or somewhere in between. We have advisory teams across the country ready to help you build your future. Search for a wealth management professional near you today.
Get in touch with us.
We’re here to help. Send us a short message explaining what you’re looking for, and we’ll reach out to you soon.