As an executive at a publicly traded company, you’re not the average investor. Not only are your assets highly concentrated and illiquid, but they’re also closely tied to the U.S. equity market. That means you’re part of a tightly coupled financial system, which leads to a different set of challenges.

How would your total compensation vary if the market had a good year versus a bad one? And what about the value of all the company stock you’ve been awarded? Even the house you live in and any other stocks in your portfolio would suddenly be worth a lot less if there was a big market disruption, because they’re all correlated to each other and to U.S. equities. When one goes up or down, they all generally do.

Practically speaking, that’s a double-edged sword. While things will work out in your favor when the market is soaring, when it eventually bottoms out, it can diminish your overall wealth. Anyone who’s lived through the dot-com bubble or the global financial crisis knows that firsthand.

The reality is that, as an executive at a publicly traded company, your financial position is more correlated to market risk than that of any other type of investor. That makes you and your peers different in terms of the challenges you face and the solutions you need. Those challenges, and how you handle them, will change over time as you progress through the different stages of your career.

In this paper, we’ll look at the professional stages that executives at publicly traded companies evolve through from a personal finance perspective as they pursue the C-suite. It’s an evolution you and uniquely successful executives across the country will experience, and one that’s characterized by the common pain points and challenges at each stage along the way. Here we will look at what those challenges are. We’ll then consider when and how to partner with a financial adviser throughout your career to help you navigate your way to long-term financial success.

 

Executive Glory: The VP on the Rise

As a vice president, you’re working hard to make your way up the corporate ladder while increasing your income.

At the same time, you’re likely amid major developments in your personal life. If you’re in your late 30s to mid-40s, even though you have a good cash flow, you don’t have true “wealth” yet. You’re probably building it through your 401(k), the company stock you’re accruing and the equity you’re building in your home. Likelier than not, the rest of your income is being consumed to maintain your family’s lifestyle and increase your lifestyle.

The reality is that most VPs on the rise are new to building and managing wealth. They simply don’t know what they don’t know. Sure, they understand their financial well-being is intrinsically tied to their career, but they often don’t have a strategy in place or the discipline necessary to actually build wealth. Instead, they just try to save money whenever they can and hope for the best.

Eventually most executives come to appreciate that that’s not enough and start to worry about what they should be doing. When they hear friends talk about how they’re managing their money, for example, it can leave a lot of executives wondering if they’re missing out on something. Some of the biggest financial questions they typically struggle with at this point in their career are:

  • What’s the best way to navigate switching jobs from a financial perspective?
  • How do I manage my company stock position without getting into trouble?
  • Am I better off making a big down payment on my first home or a little one?
  • Should I liquidate company stock to fund that down payment?
  • What else should I be doing right now that I’m not?

Despite these and other concerns, most executives at this stage are reluctant to engage a financial adviser for help. If they’ve made it this far on their own, they reason, then why bother hiring an adviser? They’re also skeptical of advisers. Can really trust them? Are they worth the money?

The reality is that, at this point in your life, having a financial adviser manage your money for you doesn’t always make sense. It does make sense to find an adviser who will collaborate with you to coach you through financial strategies and tactics so that you learn to be independent. Then, at those times when the lift is too heavy, you already have a relationship to rely on. These collaborative coaching relationships are typically paid hourly or by retainer and not with an asset-based fee.

Nevertheless, there are times when having an adviser in your corner makes sense. You should be able to get that advice on demand when you need it and in a way that makes sense for you. The right adviser will bundle or unbundle his or her services so that you can get the kind of help you’re actually looking for. For now, that might just be a year of strategic advice to help you navigate a particular challenge.

At this point in your career, the best thing you can do is work hard and focus on ramping up what you save and the next career milestone. Most everything else you can probably take care of yourself, if that’s your preference. Having said that, on those occasions when you do find yourself having to make big decisions that could impact your long-term financial well-being, seek out expert advice from an adviser who works exclusively with executives at public companies so that you can do so with confidence.

 

Executive Honor: The Trusted and Respected SVP

By the time you enter the next phase of your career, you’re older and wiser. Your career has progressed, and you’re now senior vice president or close and are earning a considerable amount of money. Your kids may have grown up and could be on their way to college. Meanwhile, you’ve attained tremendous professional success and have earned the trust and respect of the people around you. As gratifying as that is, you may also be starting to think about what your “walk away” money is and how you grow it between now and your career exit strategy but don’t risk it in a material way. 

From a financial perspective, you’re at the point where you don’t just have a great cash flow but have also accumulated wealth. In addition to your primary residence and a significant 401(k), you may have a vacation home and a two-comma position in your company’s stock. As you reflect on what you’ve achieved, you start to appreciate how much you stand to lose if you make a mistake. Not surprisingly, that means you’re probably becoming a lot more risk-averse than you used to be. 

If you haven’t already had a financial adviser, then there’s a good chance you’ve cobbled different advisers together over the years to help you out. That might include someone to manage your assets, someone else to provide tax or legal advice, and still others to meet your banking and insurance needs. And while that ad hoc approach may have worked out all right, the problem is that it’s siloed. As a result, all of those different people aren’t talking to each other and working collaboratively to help you get the best results — and you’re too busy or maybe uninterested in that role. Plus, while not expensive to engage any one of these vendors individually, engaging all of them can be very costly — until you’re faced with the price of siloed mediocrity.

To continue to build wealth and protect your assets, now is the time when most executives look to bring all of the disparate pieces of their financial lives together in one intentional, well-orchestrated and strategic effort. Of course, if you’ve used an adviser in the past and potentially had a blah experience, you might be skeptical about trying one again. Executives at this stage tend to get hung up on the idea that they’re better off managing their own funds. They bristle at the notion that advisers are paid regardless of whether or not they earn money for their clients. Not only that, but they often believe they’re successful in spite of any financial advisers they’ve worked with in the past, not because of them.

Nevertheless, if you’re an executive at this stage of your career, you’re probably accumulating assets faster than your current strategy can incorporate them. You don’t want to jeopardize what you’ve built, and you want to strategically grow to your optimal position — and you want to understand what your vulnerabilities are so that you can be sure that you and your family are set up for the long term.

For these reasons, now is a good time to either engage a financial adviser, if you haven’t already, or to at least be sure that the one you’re working with is truly meeting your needs. Either way, the decision hinges on competence and trust. If you’re going to entrust someone with your financial well-being, you want him or her to know you as well as you know yourself. You want him or her to be incredibly smart but also humble and grounded. And you want him or her to have some skin in the game so that he or she is motivated to help you get the best outcomes. Perhaps most of all, you want an adviser who will inspire you and regularly demonstrate the value he or she is providing.

For all of these reasons, it’s critical that you take the time to fully vet any adviser you consider working with. Understand who he or she is and what he or she is all about. Ask for references and make sure that you’re aligned not just on what you’re trying to achieve but also the approach you’ll take to get there.

 

Executive Legacy: To the C-Suite and Beyond

By the time you reach the C-suite at a publicly traded company, you’ve probably achieved your aspirational career goal. You have significant financial resources in real estate, company stock, diversified portfolios, cash, in addition to a seven-figure salary and annual stock and cash bonuses. The reality is that you have tremendous exposure and potential, but you’re also making enormous sacrifices to realize that potential. You might be working 80 or more hours a week and potentially be spending most of your time on the road.

Having now accumulated significant wealth, your personal financial attention shifts to others and less about yourself; you have everything you want … except time. Legacy and stewardship of capital increasingly occupy your mind. The challenge becomes less about money and more about the intangibles of your values and how you continue to lead and pass those along to your kids and grandkids. How do you grow your financial, social, human and mental capital to consistently improve?

One of biggest considerations at this stage for an executive is how he or she can pass on the four aspects of family capital to the next generation or two without creating a sense of entitlement. People who make it to the C-suite usually get there thanks to their incredible hard work and determination. They value character, honor and integrity and want their children and grandchildren to share the same values that they do. In addition to figuring out the best way to pass wealth to their children, some of the biggest financial issues that C-suite executives struggle with are:

  • Figuring out how to monetize company stock under the watchful lens of company stakeholders
  • Using trust and estate planning so as to align their family’s long-term needs
  • Focusing on how financial capital can be used to grow family social capital, human capital and intellectual capital
  • Leading the next generation with an eye fixed on the goal while teaching the missteps already taken

At this stage, executives often take one of three different approaches to managing their money. They may want to find an adviser to handle everything for them and keep them updated as if they were running a department in their business. They may want to find an adviser to collaborate with on strategy and tactics who then manages all of the execution. Or they might want a coach and retain the rest for themselves.

No matter which approach you take, here again, finding the right adviser is critical. You don’t want someone who will take a cookie-cutter approach and simply follow your orders. Rather, you’ll be best served by ideas that are delivered with experience and expertise. Better yet, you’ll want someone who also has deep experience working with people just like you: someone who has already solved every problem you might have, made every mistake you might make on your own and who has spent decades learning the nuances of working with executives at publicly traded companies like yours.

With so many choices, it’s important to cull down your options to whichever one is best positioned to help you meet your goals.

 

On the Path to Building Your Legacy

As an executive, the fact that you’re part of a tightly coupled financial system means you require a different approach to your legacy planning. It can also be one of your biggest financial challenges or one of your biggest opportunities.

The good news is that you have peers who face the same complex challenges that you do as they make their way up the corporate ladder and accumulate wealth. By partnering with a trusted adviser who works with that peer group and understands its evolving needs and how to best address them, you can be confident in your ability to not only build a lasting legacy but also that you’re stewarding your wealth in the best way possible for you and your family.

The right adviser will take the time to listen, help you identify the tenets that define your purpose and partner with you in a way that makes sense for you at any particular moment in time. That’s critical for building wealth and creating a lasting legacy.

To start building an asset management plan that’s tailored to your career path, set up a meeting with Pulliam Family Office.

Raymond James does not provide tax or legal services.  Please discuss these matters with the appropriate professional.

Any opinions are those of John Pulliam and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing involves risk, and you may incur a profit or loss regardless of strategy selected.

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