I am suddenly about to be a "high net worth individual"! We are selling our company, should close in a couple of months I should be sitting on over $15M! It looks like financial independence may actually become a reality!
Needless to say, I now have a new thing to worry about : how do I manage the money? I want to "retire"... I want the freedom to pursue a variety of hobbies, and travel and only work if I choose. I am in my early 50's, am married and have 2 kids that are still in school.
This should be no problem with this kind of money. But I've always been a frugal, fiscally responsible type of person and, well, proper stewardship of this windfall just seems like the right thing to do. I'd like to invest it, live off the return with a conservative safe-withdrawl rate of, say, 1.5% after taxes.
At least half the windfall will be held in a holding company (for tax deferral - part of the sale deal structure) and we will need to pay tax on any value we pull out of it. But both myself and my wife are shareholders in the holding company. I have set up a Family Trust that will allow us to do some investment income splitting with our kids (with non-holdco investments).
I have no desire to pick stocks. I plan to either do passive investing, or have someone else actively manage our money.
For our RRSPs, I have been a couch potato investor for many years. I understand the theory of passive investing and it makes sense to me. But I've never really tracked my performance. (With an account that you are contributing to monthly with annual top-ups and infrequent rebalancing, it is hard to evaluate return on the back of an envelope I find.)
So, although I like passive investing, I don't have completely confidence in it... not when my family's future is at stake. I believe that there maybe stormy waters ahead in the global economy and... sometimes I start falling into the dangerous trap of thinking "this time its different" With the way interest rates have been for so long, and global fiscal experiments like quantitative easing. Maybe having some financial professionals on my side who contemplate these issues 24/7 is not a bad idea? But as a closet couch potato, I obviously want to minimize management expense and have a distrust of financial advisors - they're just trying to get a comission
So... thinking about low-maintenance active management, I've talked to my bank's "High Net Worth Wealth Management" branch. They have their actively managed funds with fees that start at 1.3% and creep down the more money you have invested in them. At $5M for example, their rates are 0.85%. This program has a $1M investment threshold just to join the plan.
I have considered talking to a 3rd party active management house like Steadyhand. Their rates seem similar to the bank.
I've heard of TIGER21, which seems like an investment club for rich people (not sure if I'm rich enough to join though).
My thought at this point is maybe give the bank, and Steadyhand, each $2-3M and see how they do - how I like the service, how much confidence they instill - and in the meantime just couch potato the rest. Also thinking that I should have the active managers focus on equity, and focus my own management efforts on fixed income. Since fixed income is typically safer but with less return, it doesn't make sense to me to have to pay the active MER's for portions of the money that are in fact much lower maintenance investments. (Does that make sense?)
I also wonder if there are resources for "high networth individuals" that I am not tapping into.
So... why am I posting here? (Other than to flaunt? Seriously, I hope it doesn't sound like that, but this expected change is already making me feel self-conscious about my good luck.) I'm wondering if people have any comments about "what would you do in my situation". How would you manage this windfall? Also, do people here have any insight into the HNI resources I wonder about?
Anyway, looking forward to any responses. Sorry to be long winded but this kind of thing doesn't happen to me every day.