3 Ways to Help C-Suite Clients With Retirement
Another consideration is risk tolerance. Clients with a large balance sheet can afford to run a much higher percentage of their company’s equity as a percentage of their overall portfolio than those with a more modest portfolio.
Deciding When to Sell
A client’s disposition strategy may be time-based, with a plan to take equity off the table periodically. More likely, that strategy will be driven by the company valuation.
Either way, or a combination of both strategies, may be appropriate, but it’s helpful to determine which method will be used so it can be incorporated into the financial plan.
If clients are the beneficiary of restricted stock awards or performance stock awards, it’s common to sell those shares at vest because they’ve already been taxed in line with other W-2 income.
But if you’re talking about low-basis stock held in a brokerage account for 20 years, there might be a significant tax burden to selling.
Say a client’s company has an acquisition on the horizon that’s not yet public, and because the client has knowledge of it, the executive can’t trade.
A Rule 10b5-1 sales plan is designed to allow executives with knowledge of highly sensitive non-public information to trade throughout the year. These plans are especially useful during periods when C-suite executives are restricted from trading company stock, referred to as “blackout periods.”
These periods generally coincide with the timing of the company’s quarterly earnings schedule or when a material event has occurred.
The company’s stock may be most volatile during this period, and the 10b5-1 plan allows clients to set predetermined parameters for sale of the stock months ahead of the sale event. The plan provides the flexibility to trade the stock at an aspirational or attractive valuation during a period when the executive would have otherwise been restricted.
Depending on a client’s industry, the executive may be subject to blackout most of the year with only a few, short, open periods throughout the year, or the blackouts may be limited to four to eight weeks each quarter during the company’s earnings period.
However you advise your C-suite clients, you’ll want to be sure to include their accountants and corporate counsel in the conversation. Together, you can help them maximize the wealth they worked so hard to build.
Sam Aspinwall is a private wealth advisor, managing director and founder of Executive Consulting of Raymond James, an advisory practice focused on serving public company corporate executives.
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