In our last blog, we identified the reason why many corporate executives suffer a form of cognitive dissonance due to the unspoken concern that the evolving complexity of their lives and expanding finances may have outpaced their existing advisors’ consultative capabilities. Their golfing buddy is a wonderful person, but professionally speaking, he/she just isn’t proactively cutting it any longer.
We used air flight as an analogy: with higher altitude and greater flight speed (props to jets), any pilot would agree that one’s thinking and forward vision must expand to provide time for optimal and if necessary, corrective flight management. Unfortunately, clients generally assume that “their guy” flies at the same speed and altitude as they do. Unless their advisor specializes in working with Senior Leaders, we frequently discover that a client is flying a compensation jet at 500 mph and 38,000 feet. However, their advisor, while a great friend, runs an advisory practice predominantly working with folks flying Cessna prop planes at 140 mph and 10,000 feet. Herein lies the reason for the disturbing cognitive dissonance that eats at prospective clients.
In our opinion, if you discover that your present advisor is not capable of proactively focusing on the following types of topics, you may confidently assume that the modest pain of making a change in advisory alignment will be well worth the change. Our team skillfully helps clients make the change as easily and comfortably as can be accomplished. In fact, we are masters of change with many of the local F500 companies’ comp and benefit details laid out in a preexisting benefits grid that enables our team to mesh with a new client’s benefit structure without the client having to review the enormity of the details with us. In essence, once we understand the goals and objectives of a given new client, we are empowered to consult with them on how best to optimize the existing compensation structure to best achieve their objectives. A prospective client does not begin a relationship with our team under the burden of teaching our team about how their compensation system operates. That’s refreshing!
Essential Topics for the Pre-Flight Checklist
Organization + Decision Empowerment Focus
- There’s not always enough time to focus on all aspects of your finances. We bring organization and intentionality to your finances.
- Build a comprehensive financial model that permits collaboration and the creation of alternative scenarios which empower families to make more confident financial decisions based on improved insight.
- Examine alternate retirement dates and objectives by modeling work-life scenarios to develop your retirement plan and timeline.
- Provide access to a custom, encrypted client website containing an array of financial data, summary reports, and an electronic storage vault for vital documents.
Employee Benefit + Equity Compensation Focus
- Craft the ideal option exercise strategy using statistical and wisdom-based modeling.
- Optimize benefit elections for maximum company contribution and goal alignment.
- Prepare strategic open enrollment election recommendations.
- If desired, obtain a 3-year income tax review from a qualified professional via our in-house tax team.
Risk, Cost, + Allocation Focus
- Coordinate your company-sponsored investment allocation with your non-company investment allocation to achieve optimal alignment across your entire portfolio.
- Outline the difference between risk “tolerance” and a more beneficial perspective known as risk “preference” and how this new knowledge impacts portfolio allocation decisions.
- Develop an investment strategy or “worldview” which coexists with market volatility.
- Provide insight on tax diversification and the cost-effectiveness of your current investments.
Estate Plan + Risk Product Focus
- Deliver a review of your current estate plan.
- If appropriate, provide direction to bring your estate and legacy plans into the 21st century using the latest design opportunities and the best jurisdictions, like South Dakota. Your new plan will most likely incorporate asset protection planning and self-settled trusts.
- Provide a thorough review of all risk products and asset protection techniques given the context of your present and expected financial circumstances, including life, disability, long-term care, property, casualty, and liability insurance
Retirement Cash Flow
- It is important, regardless of net worth, to understand how to sequence cash flow for annual retirement income needs (in all market conditions).
- Develop a tax-effective cash flow plan for your retirement income objectives.
Concentrated Wealth Positions
- Equity compensation is a valuable segment of a senior leader’s overall compensation structure.
- Too much concentration is a risk. We are experienced with diversifying concentrated wealth positions.
Charitable
- Understand your wishes – both present and future – and optimally execute your philanthropic aspirations.
- In many instances, thoughtful use of Donor Advised Fund contributions helps in managing the concentration of wealth risk and improves the net tax effect of reordering a portfolio allocation.
Holding Requirements
- Holding requirements force us to consider the most tax-effective way to diversify and continuously conform to company requirements and SEC regulation constraints.
- Maintain separate technology to continuously measure and monitor holding requirements and available shares.
- Assist in creating the most tax-effective plan to meet your holding requirement while using Trading Plans to create and customize an optimal diversification strategy.
Compensation Forfeit Value
- Last but certainly not least, we represent the client’s family and NOT the company for whom our client works. As such, our team has massive experience at measuring the Compensation Forfeit Value of an officer’s current compensation plan. This knowledge helps us help our clients negotiate the maximum possible new compensation in the event one of our clients finds themselves interested in an alternative job offer.
Of course, all the above cannot be tackled all at once, but our advisors take a proactive approach and will demonstrate early on in a new client relationship that we skate to where the puck is going, not to where it currently is.
Stoddard Barnhill, CFP®
sbarnhill@thebahnsengroup.com
Sarah Leitzke, CFP®
sleitzke@thebahnsengroup.com
Phillip Barnhill, CLU®
pbarnhill@thebahnsengroup.com