It seemed as though Michael Begin was deliberately trying to rain on Lincoln’s parade when he and his partner, Darl LePage, sent out a Wednesday warning that Nebraska’s Powerball winners’ joy may be short-lived.
“The reality is that 70 percent of all lottery winners will squander away their winnings in a few years,” the Connecticut financial advisers said in a news release. “In the process, they will see family and friendships destroyed and the financial security they hoped for disappear.”
Ouch — if you’re one of the lottery winners, that is.
The authors of a book about how success often destroys families, Begin and LePage said they know firsthand the destruction sudden wealth can cause.
“We know from studies and our own internal research that when new wealth is created in a family, there is a 90 percent probability that all of that wealth will be gone by the third generation,” LePage said in the release. “And that’s among families who have worked hard for years to achieve success. When people receive sudden wealth, like in a lottery jackpot, the numbers are much worse.”
Worse yet, said the advisers who have served clients in 18 states, winning a bunch of money doesn’t build character. “(It) reveals character and magnifies all of the good and weak traits the winner lives by.”
Ouch again — that is, if you don’t have much character.
Begin said in a telephone interview they are not just trying to drum up some business with Nebraska’s newest multi-millionaires. Their point was to say it’s not just about the money.
Begin said he has had a couple of lottery winner clients, and has studied and worked with people whose net worth is $5 million or more.
Statistics show lottery winners often go bankrupt, get divorced and have family feuds, he said.
“No one worries about the true impact on lives,” he said. “They just start spending. They spend it on toys, they spend it on luxuries. Bad investments. Scams. There’s people coming out of the woodwork trying to take advantage of people. They just become a huge target.”
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Part of the problem is that many lottery winners are average Joes who have no experience handling huge sums of money. So, they buy and invest without realizing what it will cost to maintain the houses they buy or to pay their taxes.
Soon, they’re backed into a corner — even if they started out with $15.5 million.
Here’s Begin and LePage’s advice: “Take a deep breath. The money is only a tool, not a magic cure. Seek out solid professional advice, and make sure your team of advisers works together closely, and that they focus on your family before they plan for your money.”
Reach Deena Winter at 473-2642 or firstname.lastname@example.org.
Top 8 things NOT to do with lottery winnings
Local financial advisors, say there are a few things the lucky eight should NOT do with the $124 million they’ll split after taxes.
* “I would advise against immediately beginning to live a life of luxury,” said Edward Jones investment representative Bill Carter. Winners should weigh whether a purchase will appreciate or depreciate in value, and avoid those that depreciate.
* Tim Cox of Central Financial Services said they should avoid out-of-control spending.
“There’s nothing wrong with treating yourself (to a new car or home), but sometimes people go on to buy things they maybe don’t need.“
* Winners need to study their options for at least six months and then develop a strategy.
Don Geis, who owns an investment firm, recalled a man in rural Nebraska who became an instant millionaire by investing in tech stocks. “He continued to invest in speculative stocks, and his net worth dropped over 90 percent. He got rich and wanted to get richer.”