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3 Financial Planning Mistakes Executives Make

Financial Planning & Wealth Strategies

Executives have a number of unique pressures in their lives. From needing to be strategic and clear-eyed to needing to provide morale and support to those around them, our executive clients are often both incredibly incisive and very optimistic when it comes to the workplace.

That said, an objective, outside opinion can help executives make better decisions about their wealth and their personal risk exposures. There are key mistakes we often see with new clients that can work against that goal—some are more dangerous than others, but reviewing these areas can provide a more robust foundation for your individual financial planning.  

Too Much Wealth In Company Stock 

Many executives with strong equity compensation plans end up acquiring significant concentrated stock positions in their companies. If all goes well, this can be a great way to boost your wealth—but it can also be an effective way to take on excess, unnecessary risk.

We recommend looking at your company stock position in the context of your overall wealth, your portfolio, and any other unique risk factors you might be facing. For example, in some cases it might make sense to carry an “overweight” position in your company, but the rest of your portfolio may require a more conservative or highly-diversified approach to mitigate that exposure. In other situations, it can be preferable to reduce your company stock position over time in order to diversify your wealth and capture capital gains.

There are many approaches to managing concentrated equity exposures, and determining the right one is a larger financial planning exercise that we strongly encourage every executive to consider.  


Using Cash For Charity When You Could Use Something Else  

Many of our clients are serious about their philanthropic pursuits, but how you share your wealth can help not only the recipient but you, as well. For example, it’s not always ideal to give cash to your favorite organizations and causes. In some cases, it might make more sense to give unrealized securities—such as a position in your company’s stock.

This can help you in multiple ways: first, you get a tax benefit, as the charitable deduction covers the full value of the securities. Second, you can save yourself on taxes, especially if your tax basis for those shares is very low. Finally, you can use this strategy to diversify away from a concentrated position and create more diversification in your portfolio.

As with any charitable giving strategy, we recommend that you review this approach alongside a few others that might make sense for your particular situation, especially if you don’t normally itemize your deductions.


Considering Future Unrealized Gains as Current Wealth 

There’s a very big difference between cash flows, options, and assets—and another big difference between future unrealized gains and current wealth.

It’s all too easy to mix these up, and many executives fall into the trap of considering a big future payoff part of their financial landscape. While stock compensation plans can provide a boost to your wealth in the future, the decisions you make should be strongly rooted in the assets and cash flows that you can count on right now.

In considering those potential windfalls, it’s important to walk through the risks, probabilities of reward, and tax and other consequences of your executive compensation plan. We believe that with careful planning, you can make the most of these benefits and reduce the potential risks they pose to your financial security.