Strategic financial planning is important for everyone but especially for high-income earners that have their compensation tied directly to the success of the business. Executives and entrepreneurs both rely on accessing their wealth at the end of their employment, requiring them to make the best financial decisions for themselves ahead of ‘cash out’ their share.

Executives receive regular pay and a percentage of their compensation in the company’s stock, making it easier for them to liquidate and monetize at the end of their employment. Their stock portfolio’s risk is tied to the performance of the company and therefore, their personal portfolio may be positioned more conservatively.

For entrepreneurs, the time of liquidation and the ability to monetize on their investment is quite different then when working for someone else. Entrepreneurs receive the majority of their compensation at the time they liquidate their business. For this reason, diversifying their wealth away from the business can help minimize the risk of too much capital into one concentration—their business.

While some entrepreneurs choose to keep their businesses late in life, others look for the chance to sell early and start another business. With more money now available from liquidating there is an increased responsibility to manage it and more problems to address.

When preparing to retire or sell, the anxiety of the business’s valuation continuing to support the lifestyle the executive or entrepreneur had or wants to have may lead to unhealthy financial behaviors. Addressing this desire and working towards protecting the entrepreneur through advice and strategic financial planning can lead to a healthier financial outcome.

Liquidation windfalls can risk retirement asset depletion if strategic financial decisions aren’t in place. If you have a business and are in need of a financial partner that understands what it means to be an entrepreneur, we welcome your inquiry.

 

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

LPL Financial does not provide business valuation services.

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