What to do when you're suddenly rich

Congrats — you just sold your next-gen AI company! Or maybe your reclusive Albertan oil-baroness Auntie Jane just left you all her money! Either way, you’re not just rich now, you’re crazy rich — so rich that managing your money now takes serious effort. How do you make sure your fresh pot of gold stays full? We asked Adam Fisch, head of family continuity and senior relationship manager at Our Family Office, and Danny Ritter, a partner and portfolio manager at Richter Family Office, for their advice. And if you’re not rich, (1) it’s always nice to dream, right? and (2) some of their advice applies to folks still building up a nest egg. 

1. Hire an all-star financial team. 

Sudden wealth isn’t all champagne and caviar. It’s some of that, sure. But it can also be deeply traumatizing, says Fisch. Relationships change. Sharks circle. You’ll probably need to set up a family office to manage your wealth, pay your taxes and bills, chase away leeches, and guide your family through this new reality. Most home offices have a CEO, accountants, and investment analysts, and they typically charge 0.4% to 0.6% annually of assets under management.  Lesson for the rest of us: Paying someone to manage your investments can be worthwhile — so long as you don’t overpay. Some actively managed mutual funds charge 2% or more annually. With that expense, if you invested $50,000 and got a 7% annual return, you’d end up with about $130,000 less after 30 years than if you had invested in a fund with a more reasonable 0.40% fee.

2. Decide what sort of HNWI

Ritter suggests asking yourself some big questions early on: what’s the purpose of this money? How do you see it impacting you and your family? Do you want to give most of it away, or build an empire?

Your answers will shape your investment strategy. Fisch urges clients to think of wealth in three buckets: lifestyle, family inheritance, and charity. 

Lesson for the rest of us: Set clear goals so you (1) save enough, (2) don’t oversave and drive your family batty with austerity measures, and (3) use your extra money meaningfully. To point No. 3, one easy, tax-free way to help your grown kids is to gift them money to max out their TFSA. Or if you want to donate, you can open a Donor-Advised Fund (DAF) to get the tax write-off now and pick your causes later.

3. Get creative with your investments. 

When you’re in the nine-figure club, Ritter suggests thinking beyond bonds and stocks. “The ultrarich have access to more tools in the toolbox,” he says. “They’re investing in a startup or the development of an apartment building. They’re lending money in a deal” that can potentially deliver outsized returns.

Lesson for the rest of us: Consider diversifying with alternative investments, REITs, etc. Many financial institutions now offer private-credit and private-equity funds to ordinary investors. You’ll have to lock up your money for years, but the returns could be hefty.

4. Treat yourself. Just don’t spoil yourself.

Ritter doesn’t mind when moneyed clients buy flex pieces. “It’s important to buy that asset-slash-toy and get it out of your system,” he says. But remember: your swanky ski chalet and skippered yacht need regular maintenance, and those costs can quickly eat away at your wealth.

Fisch’s rule: don’t do anything you can’t take back. “If you have $100 million, you can buy a $20,000 watch that you regret,” he says. “If you buy a $20-million jet, it’s a lot harder to offload.”

Lesson for the rest of us: Watch out for lifestyle creep — i.e., letting luxuries become daily necessities — and keep your recurring expenses low. Delaying a $500/month car upgrade and investing it instead can leave you with $36,000 after five years at a 7% annual return.

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