If you became an overnight millionaire – say you won the upcoming Euromillions jackpot – you’d probably be too excited to think about getting financial advice.
Most of us don’t have an accountant or a financial adviser and the vast majority of lottery winners are in so-called blue and white collar roles, so are unlikely to be paying for that kind of service until they win the lottery.
So how do they know what to do? Well, in England and American there’s a dedicated support team for lottery winners.
Financial Adviser to Lottery Winners
In the UK, if you win more than £50,000 on the lottery, you’ll get a visit from Andy Carter or one of his colleagues. They are the lottery advisers. Sounds cool, right?
Andy, 41, works for the lottery provider Camelot, who run several of the country’s lotteries. It is his job to check the the ticket holder’s identity, sort out the relevant paperwork and arrange for the bank transfer of the funds. Can you image saying, “Please transfer £10 million into my bank account”?
Things are a little bit different for lottery winners in the UK, compared to other countries, however. You no longer get given a cheque and money can only be claimed in a lump sum rather than in instalments, called an annuity, which are common in other lotteries, especially in the US. (We think this is a good reason to use Lottosend to play international lotteries!).
Andy has first-hand experience of lottery winners’ reactions. Some go wild and start spending left, right and centre but a lot of people haven’t adjusted to the reality of being a lottery winner when Andy sees them:
“By the time I get there [the day after the winners’ call], some have already arranged a viewing on a house,” he said, talking to the BBC.
“But the perception is that winners go out and buy a fast car. They don’t. They are in shock. They realise they need some help.”
But he is not actually qualified to give financial advice. For that, winners will have to make their own arrangements, though Camelot can recommend providers.
Not surprisingly, winners normally want to pay off a mortgage and look after their families’ finances. But to do this, Andy recommends taking a breather and making a financial plan. Next, we’ve got some helpful tips.
Financial Advice for Lottery Winners
Here’s a few tips that can help when you’ve won a big sum of money:
1. Limit Big Spending
Limit your sending of large amounts to those things that will almost inevitably increase in value: more buy-to-let property or investments into high income producing shares or government gilts or bonds. These are the kind of assets that a good financial adviser will be able to seek out for you. The income from rent and interest alone can be enough to lead a comfortable existence so that you don’t make too many dents in that nest egg.
2. High-interest Accounts
Think about how you can make more money from this god-send of a fortune. Get advice on the best high-interest accounts for millionaires and the sort of tax wrappers that will mitigate the money you lose in taxation.
Lottery winners need to diversify their investment portfolio, to mitigate potential risk. Imagine you’d won the lottery and put all your money into property before the 2007-2008 financial crisis, when the housing market collapsed. Make sure you’ve got a good mix of safe and risky investments, with the balance towards the safe side of things, so you don’t end up with worthless investments.
4. Regular Meetings
Once you’ve made a plan you should keep meeting with your financial adviser to go over how your investments are working for you and to ensure your financial plan will safeguard your fortune for you and your family. It’s easy to get lax when you know you have so much money but it pays to be vigilant.
Legal Advice For Lottery Winners
There’s a really good article on the legalities of winning the lottery on the American Bar website. Not only does it talk through the process from a lawyer’s point of view but it provides some telling examples of how lottery wins can lead to unforeseen consequences.
It advises that you be careful about any financial planners who immediately appear on the scene, as they are probably not legitimate. It also provides information on gifting the money and whether to claim the jackpot as an individual or as an entity.
The author of the article, Karen S. Gerstner, explains that lottery winners can be surprisingly demanding and are usually unable to pay any fees before they actually claim their winnings:
“Another difference between lottery winners and your usual clients is that most lottery winners are not able to pay a retainer. Further, lottery clients will pressure you to do the necessary legal work as quickly as possible—they want to collect that prize now! Thankfully, I have never had trouble getting paid for my work representing lottery winners. Based on my experience, though, you should have your bill ready to present the moment your client collects the prize.”