“It takes as much energy to wish as it does to plan.” — Eleanor Roosevelt

Concentrated executive stock positions may make up anywhere from 50 to 80% of an executive’s net worth — yet there’s often no intentional strategic plan around monetization.

The reason? Investors and analysts take a dim view of these divestments. They perceive these transactions as an executive reducing the amount of skin he or she has in the game and as a loss of confidence in the companies they run. Boards of directors abhor these negative perceptions. The optics just aren’t good.

Perilous Waters

Yet having a portfolio highly concentrated in a single stock position exposes these executives to excess volatility and risk based on the fortunes of a single company in a single sector. When that company is also your employer — your job, paycheck, and benefits — your entire financial well-being is tied to the success of that one enterprise, and history is littered with high-flying companies that suddenly took an uncontrolled dive into oblivion. The Enron debacle wiped out more than $1 billion in employee retirement savings. Nearly a decade and a half later, RadioShack employees found themselves in the same predicament. These are two of many examples.

We’ve dedicated ourselves to helping executives avoid these risks by balancing their portfolios through a variety of strategies. One is the Rule 10b5-1 plan established by the Securities and Exchange Commission (SEC), which allows corporate executives to divest of major company stock holdings while avoiding conflict of interest charges and accusations of insider trading. This is just one of many monetization strategies. We generally structure a three- or five-year strategy to manage executive stock concentrations.

Company Stock as a Lifestyle Enhancement

Many executives want to sell stock for a particular benefit, a lake house or a larger primary residence in a different neighborhood. I am positioned to help them engage in a repeatable, dependable process to determine if they should sell or hold to meet their financial goals. How do we plan for these contingencies?

I engage them in a disciplined data-driven strategy around their concentrated stock positions and make it my responsibility to alert them at key decision points. I prompt them when conditions are right and their concentrated holdings need attention. I take their portfolio off their plate, empowering them to stay focused on running their companies.

Gain the Edge

Three of the primary reasons people hire an advisor are:

  1. Information
  2. Analytics
  3. Informed guidance paired with disciplined action — the behavioral edge

Today, in the digital age, the information and analytical edge has disappeared. Each investor has access to the same information and analytics that I do. What’s left is the quality of that behavioral edge.

High-level executives are working 70 to 80 hours per week. Their money is very important to them, but they don’t have time to think about it. Effective executives outsource this concern to personal wealth managers like me. That is extremely valuable.

Set up an appointment with me to learn more about monetizing your stock position.

Any opinions are those of John Pulliam and not necessarily those of Raymond James Financial Services 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 nor protect against a loss. Investing involves risk, and you may incur a profit or loss regardless of the strategy selected.

Share this

Recommended Posts