ear Liz: It looks like my mother is going to win a lawsuit that could bring her more than $2 million. Can you advise us what steps to take once she receives her money? She wants me to play a major part in her finances as she is not a native English speaker, but I do not know much about finance, either. I can probably look for a financial advisor, but how do I know we are not going to bump into another Bernie Madoff?
Answer: Your mom needs at least three advisors to handle such a big windfall: a financial planner, an accountant and an estate-planning attorney.
You can get referrals for fee-only financial planners — who are compensated only by fees their clients pay and not by commissions or kickbacks — from the National Assn. of Personal Financial Advisors at http://www.napfa.org or the Garrett Planning Network at http://www.garrettplanningnetwork.com. You should interview at least three prospects about their education, ethical commitment and experience advising people who acquire sudden wealth. Check out their backgrounds using the BrokerCheck feature at the Financial Industry Regulatory Authority website (FINRA.org).
Garrett advisors typically charge by the hour and often don’t manage assets — the client makes the actual investments. NAPFA advisors typically do offer asset management and may charge a percentage of assets.
One way to reduce the chances of becoming a Ponzi scheme victim is to make sure your money is held by an independent financial institution such as a bank, brokerage or mutual fund and that your statements come from that institution. You also should find out who audits your advisor and do a background check on that company as well.