By Greg Hart, CFP®
I know several successful executives who are at the top of their game. They’re making their company hundreds of thousands of dollars each year. But they’re not doing much to save for their own retirement, minimize taxes, or plan for their estate.
It’s not because they don’t want to. Trust me, they do. But it’s because they don’t have the time or expertise to manage their complex, ever-growing financial situation. Sound familiar?
Here are 3 common financial mistakes we see corporate executives make—and what you can do to avoid them.
1. Corporate Execs Usually Have Overly Concentrated Stock Positions.
Your wealth as a corporate executive is largely tied to the success of your company. You’re compensated well—in the form of restricted stock units, non-qualified stock options, incentive stock options, performance shares, non-qualified deferred compensation plans, and so on.
But this also means your wealth is most likely largely concentrated in your company’s stock. If you lose your job or your company hits a rough patch, your wealth could tank in the blink of an eye. That’s why it’s important to incorporate diversification strategies into your financial plan. These strategies could include:
- Programmed stock selling
- Year by Year stock reductions
- Gifting programs to charity to reduce taxes
- Using a blind trust to sell stock
2. Corporate Executives Aren’t As Focused On Tax Planning.
Remember all those compensation methods we talked about earlier? It turns out that each one has its own tax treatment, leverage options, time and vesting requirements, risk factors, and more. And let me tell you, that’s a lot to keep up with when you’re focused on running a company.
Case in point: A study was conducted where corporate executives ranked six financial goals in terms of importance. The study showed that 64% of executives said saving enough for retirement was their most important financial goal, while only 16% were concerned about minimizing taxes. (1)
As a financial professional who has been in the industry for over 25 years, I can tell you that taxes are a major unexpected risk for high-net-worth families. They can quickly derail your wealth if you don’t plan for them—especially when you have complex compensation methods.
3. Corporate Executives Don’t Have A Personal Financial Plan.
As a corporate executive, your work revolves around plans: corporate financial plans, contingency plans, strategic plans, and the list goes on. But when it comes to your personal life, plans often get put on the back burner.
But just as the success of your company largely depends on your ability to plan, so does the success of your personal finances.
If you want to truly maximize your wealth, you need a comprehensive financial plan that takes into consideration all of the various parts of your financial life and organizes them into a comprehensive plan which addresses your hopes, dreams, and values.
A strategic financial plan serves as a road map for how you’ll handle each and every financial challenge you may face as a corporate executive. Challenges such as:
- How to best diversify your wealth, so it’s protected if you’re laid off or the company performs poorly.
- How to deal with the time constraints that come with vesting and expiration periods, blackout periods, non-qualified deferred compensation plans, and more.
- External pressures of making certain investment decisions and following the status quo.
How We Help Corporate Executives
The beautiful thing about overcoming these financial challenges is that you don’t have to do it alone. A trusted financial advisor can serve as your sounding board and personal CFO, giving you advice and guidance on how to maximize and protect your wealth.
At Haddon Wealth Management, we specialize in working with corporate executives and walking them through their options. If you’re facing any of these common financial challenges, we’d love to chat with you about how we can help you avoid them. To get started, call us at (856) 888-1744 or contact us online to schedule a complimentary get-acquainted meeting.
Gregory M. Hart, CFP® is the founder and managing director of Haddon Wealth Management, LLC, a registered investment advisory firm that provides comprehensive wealth management (in-depth financial planning and sophisticated investment management) for clients who value a relationship-driven approach that delivers customized solutions. Based in Haddonfield, New Jersey, Greg works with clients throughout the Delaware Valley, as well as nationwide. To learn more, connect with Greg on LinkedIn, visit our website at www.haddonwealthmgt.com, or call (856)-888-1744 to begin a discussion.