Most executives come to Spurstone with an existing broker/advisor relationship. They may have worked with someone at a bank or brokerage firm who has managed a portfolio for them, sold them some investments, etc. In our experience this can be both a good and a bad thing.
It’s fantastic that these folks have already taken the initiative to seek guidance and insight, so they tend to be open and receptive. The negative, which in most cases turns positive for our team, is that their previous experience can often create a preconceived notion of what they expect from our team. Most banks and brokers want your assets and your trust before they prove any real value. We find that by proving our value up-front through our processes and unique expertise, we often flip that preconceived notion on its head quickly.
We recently had an executive referred to our team by a colleague. This executive is roughly three years out from his planned retirement and had some questions around management of his portfolio. As we went through our 10EX Executive Audit, we were able to determine that his biggest stress point was his tax exposure and there was a glaring issue with his current compensation plans.
He and his current broker were planning to defer his stock compensation into retirement at which point he was planning to change his state of residence. He was hoping to liquidate his options in retirement to avoid paying income taxes in his current higher income tax state. This is a big and common error that would not work as planned. The stock option compensation would always be taxed where it was earned, his current state.
Through our 10EX Executive Audit, we developed a custom strategy to defer other substantial income sources into retirement. We structured that income in a way to transfer the state of taxation to the state of residence, at time of distribution (in retirement), and avoid taxes in his current state of residence. We then accelerated the stock option sales to offset his deferred income.
By utilizing this strategy, we anticipate state income tax savings in excess of $150,000, with the added bonus of reduced employer stock risk. The diligent analysis and planning in our 10EX Executive Audit showed this executive the unique capabilities of our team, and how our expertise in partnering with executives can create substantial opportunities in the short and long-term.
If you or someone you know could benefit from an independent evaluation of your wealth by a team of fiduciary executive wealth specialists, please reach out to our team to schedule an introductory call.
Partner, Spurstone Executive Wealth Solutions