Retired Executive with Concentrated Position

Executive Summary

A Senior Executive retired after decades with one company and a net worth in excess of $17 million — 90% of his net worth was in company stock. The client:

  • Wanted to reduce exposure to the company stock, but didn’t want to sell all his stock immediately as he was personally at tached to the stock, and to the company.
  • Tried to time his sales in an effort to maximize his return
  • Was deeply concerned about the potential negative financial impact to his family if the stock price suffered a significant downturn.
  • Had strong charitable inclinations.
  • Held stock in retirement as well as after tax (brokerage) accounts.

SOLUTION

We developed a disciplined strategy to:
  • Dramatically reduce the concentrated position over a 2-3 year period.
  • Minimize taxes, protect the downside from catastrophic loss, lower the volatility of his positions, and participate in the upside by utilizing option strategies – writing covered calls and buying puts.
  • Utilize a net unrealized appreciation (NUA) strategy.
  • Meet the charitable intent while protecting the financial desires of the client.

RESULT

  • The plan was fully executed and achieved in only 18 months reducing his concentrated position from $14 million to less than $3.7 million and his other stock positions from 90% of his net worth down to 25%.
  • Client retained a substantial amount of company stock (this was personally important) that was well in excess of what was needed to meet his goals.
  • Implemented a gifting strategy that saved $40,000 for every $100,000 in charitable gifts.
  • The sell discipline strategy netted a material premium versus had he sold all stock immediately.
  • The proceeds from the concentrated position were used to build a diversified portfolio, giving him and his family peace of mind.