Hey all. 38 y/o and recently received a large windfall from a business transaction. Up until this point, I have not been investing at all. I was just getting to the point that I could start, and then I sold my business. Proceeds will be >$5mm right off the bat, with about another $1mm in escrow that will release within a years time. At the new company, I have a healthy RSU package if I can go the distance with them, and about $250k per year salary. I don't want to consider these too much in the big picture because tomorrow isn't promised, I hate depending on future events/monies.
The shine of the transaction wore off really quickly, and now I'm pretty terrified of messing this up. For me, this is an enormous amount of money, and can lead to FI if treated correctly.
I have a lot of people suggesting I open a fidelity account, hire a flat rate fiduciary (have a good recommendation from a friend) and self direct.
I'm fairly uncomfortable with that in this moment. I now have a new role at the acquiring company and am pretty busy with work. To put it plainly, I don't have time to learn the intricacies of investing smartly.
I'm thinking my plan is to use a FA, take the next couple of months to learn, and then maybe bring tranches of money over to a self-directed account.
I could also put something like $100k to the side and use that right off the bat to join up with the fiduciary and start self directing those monies. It would give me a good side-by-side performance comparison, and give me a way to learn without betting the barn on it.
I appreciate nay commentary on this plan! Thanks.
Big windfall. Financial advisor while I take the time to learn?
byu/fishnsurfsteve infinancialindependence
Posted by fishnsurfsteve
8 Comments
Congrats! With 5 million, you are FI. How much do you spend a year?
I would put 75% in the S and P 500, 20% in Bonds, and up to 5% in cash.
If you have already won the game there is no need to take much risk.
What is the difference between engaging a fee-only fiduciary for a detailed plan with minimal maintenance, then acting on those instructions, versus paying someone to manage your money for you?
Since most advisors charge a percent or two for active management, the difference for you is likely going to be $50,000-$60,000 per year. Can you afford that “tuition” while you learn to self manage?
learning material: [Bogleheads® investment philosophy – Bogleheads](https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy)
I would buy several million of VT, and probably 15-20a% bonds. Max out retirement accounts as much as you can.
For a financial advisor 100% make sure to use a fee based fiduciary. Do not get into the scheme of someone that will pull a percentage off your investments. That windfall will bring out the vultures in the FA space. [https://www.experian.com/blogs/ask-experian/fiduciary-vs-financial-advisor/](https://www.experian.com/blogs/ask-experian/fiduciary-vs-financial-advisor/)
Is your business QSBS?
I don’t think financial advisors are necessary at the $5M mark, but they’re reasonable. If you were comfortable self-directing your money, I would encourage you to do that. It sounds like you’re not comfortable with that, and there’s no shame in recognizing your own knowledge gaps.
Financial advisors are basically a luxury purchase. You can afford a few luxury purchases. You’ve correctly assessed that a good advisor will prevent you from making devastating mistakes.
Check out The Money Guy Show on youtube. They are financial advisors, and you can get a good idea if you’d like to work with them (or another similar firm) from watching their content. If you do think hiring an advisor would be a good fit, I would probably reach out to 2-3 firms and schedule an initial talk. Basically, interview them. They should be transparent on fees (and “fee only”), and I would strongly recommend finding a firm that primarily uses index funds.
I would definitely not put all of my money with any firm I hired to advise. I would likely have them manage somewhere around $2-3M tops, and self-manage the rest with a simple boglehead 3 or 4 fund portfolio.
Financial advisors are expensive, but it doesn’t fundamentally matter if you end up with $20M at 65 or $25M. I do think it’s important to spend the next year or so learning enough that you’re able to engage with and assess financial advisors.
Good luck, and congrats!
Dude send me $1k and I’ll send you my phone number and I’ll explain all the flowcharts (not a financial advisor)