Atlanta Financial Blog

Why Financial Planning for Corporate Executives is Just Plain Different

Why Financial Planning for Corporate Executives is Just Plain Different

AFA
April 7, 2020

The corporate executive is a rare breed. As individuals, they are highly successful, detail-oriented, hold themselves to incredibly high standards, and are well compensated for their talents and tenacity. According to The Fidelity Millionaire Outlook Series, corporate executives represent the largest percentage of all millionaire households nationwide.

If you are a corporate executive, you understand the tight demands on your time, and how hard it is to stay as on top of your personal finances with the daily demands of your job. From a professional standpoint, your job structure and compensation package also presents unique challenges that other high-net worth individuals don’t encounter.

So what makes financial planning for corporate executives so unique?

  • Performance-based compensation: As a corporate executive you work under an incentive-based compensation model with significant portions of your pay often tied into meeting quarterly or annual targets. Not knowing how much income will be coming in each year is not only emotionally taxing, but can make budgeting and periodic saving a challenge.
  • Variable compensation structures: Compensation for corporate executives like yourself can be a combination of fixed income, variable compensation based on performance, and equity incentives. All these moving parts can make maximizing income somewhat tricky. Every detail from restrictive covenants to changes of company control and how those could affect benefits can all come into play when formulating your long-term financial plan. There are plenty of opportunities to take full advantage of these perks, but also plenty of details to miss that can lead to costly mistakes.
  • Equity stock options and overexposure to risk: There is tremendous upside potential in various stock option and restrictive stock programs. However, there is also very high risk. There is the risk of retaining too much and overexposing too much of your net worth to the rise and fall of your company stock price. In reality, prices per share could tank at any time and take not only your compensation, but also your net worth, right along with it. There are a number of techniques that can be employed to deal with over-concentration in an employer’s stock, but they require a comprehensive approach including detailed tax planning. 
  • Deciding if and when to exercise stock options: While stock options can be an important source of wealth-building, there are risks in holding, risks in liquidating, and risks in exercising stock options but not selling right away. Timing, taxes, the amount of concentration in your portfolio, the outlook for the stock vs. the overall market and many other factors must be considered when designing your financial plan. 
  • Mitigating taxes: No one wants to overpay in taxes, and having a tax strategy in place is a basic pillar in most financial plans. Mitigating taxes for corporate executives, however, cannot be underrated. Optimizing deferral opportunities, choosing tax-advantaged retirement savings vehicles, planning for equity incentives, identifying deductions and credits, and minimizing ordinary income in favor of capital gains (just to name a few) are all pieces of this very complex tax planning puzzle. The key is in finding the balance that allows for maximum take home income with minimum payout to the IRS while still providing for current and long-term needs.

Financial planning for corporate executives is a specialized field and requires an in-depth knowledge of the risks, rewards, and challenges the profession presents.

Ready to relieve some of these financial pressures?

At Atlanta Financial, we have spent years working in and around the corporate arena and have dedicated an entire division of our firm to helping executives align all the complex pieces of their financial puzzle.

Contact Atlanta Financial today to schedule a complimentary consultation and learn more about our ExecFIT™ process.

Through our ExecFIT™ process, we work with executives to reach financial independence by helping them organize and gain clarity around their financial lives, then help them plan and make well-considered financial decisions to take them from where they are to where they want to be.  A key component of our work at Atlanta Financial is designing retirement planning strategies that help maximize savings while minimizing taxes.

 

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