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The experience of most jackpot winners is that many long-


forgotten siblings and friends suddenly emerge from the wood- work, says Mercier. For many years, the marketing pitch of Loto- Québec was: “It won't change the world, but. ...” Picking up on that line, infamous Quebec lottery winner Jean-Guy Lavigueur, whose ticket won him a family tour in hell in the 1980s, com- mented: “It doesn’t change the world, but everybody around me sure changed.” Today, only two of the family’s children are still alive, and the whole fortune has disintegrated, the surviving daughter earning her living as a hairdresser as of 2010. Which leads to the second bit of advice: learn to say no, says


Mercier. “Many people, especially young people, are very gen- erous to family and friends. Some are unable to say no.” And to help you utter that word, do the following, says Lee Helkie, partner at Helkie Financial & Insurance Services Inc., in To- ronto: “Don’t make any life-changing decisions for at least six months” (tip No. 3). And Mercier advises in that time “put it in a high-interest savings account [No. 4].” That way, the irrational- ity has time to evaporate and you have the best of excuses: “I can’t give you anything; the money is locked up.” Meanwhile, follow tip No. 5: seek advice. “Very few people,


maybe only 5% or 10% of investors, have the knowledge to manage that sudden money influx by themselves,” says Rob- ert Lachance, vice-president of sales, investment and retire- ment, at Groupe Cloutier Investments in Montreal. And he’s talking only about investment knowledge. There’s also legal, fiscal and accounting knowledge. So shop around and find a lawyer, an accountant and a financial adviser, says Helkie. And remember, in dealing with the fireworks that a jackpot lights up, 99.99% of people will benefit from advice. Especial- ly given that “it’s important to have someone in your corner you trust who will tell you the things you don’t want to hear,” she points out. Why a lawyer? Because most people’s lives take unexpected


turns, something Mercier, who is also a divorce mediator, is well aware of. “A woman won $5 million in a lottery and, because she went to the wrong adviser, she split the amount with her spouse. But they were common-law spouses, not married. A year later, they broke up and she ended up with only half of the $5 million.”


Follow the money Mostly, it’s about good financial advice and acumen. Helkie sets out the overarching priority: “We live in the keep-up-with- the-Kardashians world where shoes can cost $5,000. There are a lot of ways you can spend money fast. But there’s nothing bet- ter than having financial security, knowing that, even on rainy days, you will be OK. Two million can solve a lot of problems. Just be smart about it. You want to build an investment portfo- lio that can hold up in good times and in bad times.”


46 | CPA MAGAZINE | JANUARY 2018


(We set the jackpot at $2 million for a strategic reason. One


million dollars is fine, but in today’s economy, it doesn’t take you very far. Five million dollars definitely pulls you out of mis- ery. But $2 million is ambiguous: it promises financial indepen- dence — but you still have to work at it.) Aſter all, a jackpot is about money, not just psychology. But


first things first: money is about life and life plans, which can be quite different, depending on whether you’re 30, 45 or 60. But almost everyone asks the same question: can I quit my job? Most 30-year-olds today are far from settled, says Mercier.


They are not married, don’t own a house, don’t have children and are starting out on their career path. So, in the face of all those options, quitting a job and just living off the proceeds of $2 million is highly unlikely. But having just pocketed $2 million, you want to celebrate.


So go ahead, take that trip around the world or buy your dream $200,000 Mercedes-AMG GT C Roadster. Just remember, “the key is to understand the opportunity cost of any expense,” says Therriault. “Most people don’t understand the opportunity cost of a $200,000 sports car against that same amount com- pounding over 20 or 30 years or the university tuition for your child that you’re sacrificing in the long run.” A central issue here is earnings. For Lachance, a safe rate of


withdrawal to plan on for the long haul (up to age 90, which to- day 50% of Canadians aged 20 are expected to reach) is 3% for a balanced portfolio with 50% equity and 50% bonds, taking into account today’s low government bond yields. At that low rate, you can preserve your capital over a peri-


od of 30 years, but consider that with a yearly inflation rate of 2%, you will be leſt with only 50% of your purchasing power 30 years down the road. So, a pre-tax revenue on $2 million will be $60,000 — not much to live on. That’s what being a millionaire looks like today. You could build a higher-earning portfolio that contains the


usual equity and bond assets, but also a substantial share of alternative assets that have a low correlation to stock markets, such as direct real estate projects, or infrastructure projects, even hedge funds. Much depends on the financial adviser you consult with. Therriault’s firm has its own private limited part- nerships and pools that give its clients access to such asset classes. Such three-part portfolios can have much higher rates of


capital appreciation and higher revenue capacities, but it is risky today to plan on rates of earnings higher than 7% or 8%. This is crucial: portfolios that deliver yearly gains of 10% and 12% are a thing of the past. Some funds still hit that mark, but they are exceptions. “The best way to kill your financial se- curity goals is to set your sights on unreachable earnings lev- els,” warns Lachance. “Today’s financial markets are mature, populations are aging, economies grow slower, which dampens


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