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Corporate Executive
Developing a Plan For a Complex Compensation Package
Overview
Our client has spent her career laser-focused on driving results and organizational excellence in her C-suite position. Lauren’s success over the years has garnered significant reward through company stock options, executive benefits, and direct compensation. Between balancing her work schedule and spending time with her husband and children, she has not had the time to complete a comprehensive financial plan. As with many of our clients, this oversight is not due to a lack of capability, but of time. Managing a wealth enterprise is time consuming and Lauren found great value is hiring a experienced team to take over the day to day financial planning and investment management.
Key Challenges
Over the years, Lauren built up a significant concentration of company stock within her net worth. Between the 401(k) plan, non-qualified deferred compensation plan, as well as exercises of performance stock units and non-qualified stock options – over 50% of her fortune was in company stock. This concentration added more volatility than she realized in her investments. On the risk management front, as her compensation and assets grew, the coverage had not been updated to protect against the value of her earnings potential and the liability insurance to protect the accumulated wealth. In addition, the estate plan she had drafted 15+ years ago had not been updated to reflect the current family dynamic or to take advantage of numerous estate tax minimization strategies.
Client Objectives
As a self-made individual, Lauren’s top priority was to maintain financial independence for her family. The days of having to a balance a checkbook and go through expenses with a fine-tooth comb were long behind her. Her hard work and determination brought her financial freedom. Today, with two young children, she recognizes that financial education and training are critical to get them ready to interact with wealth.
We Step In...
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Benchmark's Solution
Executive Compensation and Benefits
An Executive compensation can sometimes be intimidating. We broke down Lauren's benefits for her and helped manage the ongoing process of making the decision when to exercise her stock options. Many considerations came into play: the tax impact of an exercise, the existing concentration of company stock within her investments, as well as determining the right time to pull the trigger on an exercise relative to company stock price. We work in tandem with the CPA to run tax projections as well as utilize a cutting-edge tool called StockOpter for option and value at risk analysis.
Putting Together a Plan
To bring together all of the variables, we think a detailed financial plan with written recommendations helps to bring clarity into a complicated situation. Our team conducted detailed analysis of Lauren and Todd's financial situation and found several gaps that needed to be addressed. Their estate plan was dated and needed to be revised to reflect the wealth they had accumulated in addition to making decisions around how their wealth would be transferred to their two children.
Risk Management
After looking into the existing coverage in place outside of Lauren and Todd's group benefits, our team discovered that they were under-insured for their levels of assets. With the lawsuit-happy world we live in, we recommend our clients carry an umbrella policy at least equal to their net worth. In addition, their property and casualty insurance was not updated to insure against the replacement value of their personal property and home. We worked with a strategic partner of ours to update their coverage to meet their current situation.