Jackpot! Now what?

• Author: Goodfriend, Karen
• Position: Helping Your Clients Navigate $udde Wealth - Interview

With the Facebook IPO front and center in the news, a large and young group of workers is likely to realize significant and sudden wealth. A situation like this is just one source fir triggering sudden wealth among thousands of individuals in California. In addition to a number of recent IP0s, other companies have seen their stock prices rise significantly in the past year As CPAs, we are likely to be at the forefront, advising individuals who may be unprepared for the changes in their financial status. Similarly, CPAs are well positioned to advise those who receive other types of financial windfalls, such as sale of a business or inheritance.

Successfully managing a financial windfall involves much more than the technical details of tax planning or investments. As CPAs who provide tax or financial planning services, we may be the first adviser a client may engage with questions about how much tax will be owed or how to invest the proceeds. Although a CPA's area of technical expertise may involve these areas, there is an opportunity to assist more holistically to better serve their needs. These broader areas include navigating the psychological adjustments to their new status and helping the client plan strategically given their new situation.

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In my experience working with such clients, the emotional experience of sudden wealth recipients is very different from what those on the outside assume is the ease. Although there may be a feeling of joy and elation. there also is a frequent sense of burden and stress. Wealth brings complexity that can be overwhelming those who previously had simpler finaneial lives. For example. they may now need to consider estimated tax payments and upgrading insurance coverage now that they have more to protect--or new estate planning concerns may arise. Others may experience a sense of discomfort Or guilt with the new status, or may feel uncomfortable with family and friends. For some, though, elation takes over and the realities don't get addressed. Fortunately, those seek professional advice tend to address the realities and are likely to have better success by recognizing the importance of sound decision making.

To compound the emotional issues, individuals are unlikely to share the details with their social support system for privacy and other reasons. The CPA is likely to he one of the kw confidants, and can serve as a trusted adviser 1w having open conversations with their clients...