His Situation

It’s not often that you meet people who have spent their entire career with the same firm, but Tony very nearly did just that. Having spent the last 20 years with the same company, working his way up through the corporate executive ranks, he was ready to “retire from the 9 to 5 and do some consulting work from his beach house,” as he put it.

The problem he had, however, was that 20 years of executive incentive compensation packages had left him with a whale of a portfolio, which was almost entirely concentrated in the stock, and stock options, of his company. Tony knew that he was going to need a fairly sophisticated strategy for unwinding his portfolio to help him mitigate the effect on his taxes that selling these investments would cause. He also knew that he “had to get away from having everything tied up in that company.”

Our Solution

Unwinding a highly concentrated stock holding is not an easy matter, and using heuristics, or “rules of thumb”, just doesn’t cut it. On the one hand, most people don’t want to pay the extra taxes that come from selling these investments, but on the other hand, they don’t want the risk that comes from having one big egg in their basket, and not much else. The key is to strike a balance between the two, to create a long-term strategy for moving the portfolio away from the concentrated risk, and most importantly, monitoring and managing the execution of the strategy over the years it can take to effectively follow through.

All people are different in the way they want to communicate with their financial advisor, and a successful financial advisor recognizes that they must meet their clients where they are, figuratively speaking, for the communication process to work well. Tony had been used to delegating authority, but he still wanted “progress reports” as he put it. Therefore, helping Tony meant that in addition to developing the very complicated strategy for handling his stock and options, and crafting an investment strategy to suit his needs, we also came up with a plan for simply communicating periodically with him about the changes we made, and the changes which were still to come. “Knowing” helped Tony feel more empowered, and more comfortable with the changes taking place.