The Glass Hammer, one of my favorite blogs for women in business, posted a great article last week with tips on personal finance for executive women. It was contributed by Myra Salzer, author of Inheritor’s Sherpa and Living Richly: Seizing the Potential of Inherited Wealth. You can find a snippet below. (Keep the awesome content coming!)
1. First – secure your “nut.” There is a quick and easy way to calculate whether or not you have inherited enough to have your “nut” secure already. Can you comfortably live on one fortieth of your inheritance? For example, let’s say you inherited $10 million. $10 million divided by 40 equals $250,000. If all your needs and wants would be met on $250,000 per year (after taxes and adjusting for inflation) then your “nut” is secure. All you need to do is invest in a manner that keeps up with inflation and spending. Of course, you’ll miss out on the next hot IPO (initial public offering) and you will never again enjoy cocktail-party bragging rights boasting about your latest venture. But you will be secure.
2. Then – find an investment management firm whose intractable systematic approach is wealth preservation. (We recommend independent registered investment advisory firms that don’t sell any products and who are not associated with any brokerage houses or broker dealers.) Remember, you don’t need to make a killing in the markets when your “nut” is secure. You need only avoid losses. This isn’t nearly as easy to accomplish as it was for Grandmother, but it is doable. Find someone with a global perspective whose analysis goes beyond the scope of modern portfolio theory and CFA (certified financial analyst) curriculum.
3. Make sure your investment manager is a fiduciary, a person or firm whose legal obligation is first to you, above all else. If the management firm is, for example, a public company, the managers’ first obligation is to the firm’s shareholders, so they cannot possibly be fiduciaries. Demand that the manager agrees to a fiduciary contract.