Stephen, an executive at a large pharmaceutical company, was referred to Rockwood by a long-standing client. A bright individual who enjoys spending time with his family, Stephen recognized that his complex financial situation required advanced planning beyond the capabilities of his current broker.
A sizable percentage of Stephen's net worth was tied to accounts maintained by his employer. He had accumulated large positions in his company's stock due to stock options and restricted stock grants. He even maintained shares of company stock inside his 401(k), which further contributed to unnecessarily high levels of single stock risk. Moreover, Stephen's investment strategy for his brokerage account consisted of ad-hoc mutual fund purchases based on recommendations from "well-accredited" financial websites. His broker facilitated this bad investment behavior by purchasing these mutual funds and a handful of supposedly "hot" stocks at Stephen's request in an attempt to keep him happy.
We worked with Stephen in creating an aggregate portfolio that integrated his brokerage account, his IRA, and his current 401(k) plan assets. We analyzed the available options in his 401(k) as well as his non-qualified deferred compensation plan and engineered an allocation that would integrate those assets with his non-employer held accounts. By structuring a scientifically diversified portfolio so that the tax-efficient asset classes are held in his taxable brokerage account and the tax-inefficient asset classes are held in the tax-deferred accounts, we were able minimize his tax liability and hedge against the risk of owning large amounts of company stock.
We laid out a structured and coherent liquidation strategy for his stock options, restricted stock, and other long-term incentive compensation to mitigate the concentrated exposure to his employer's stock price. We helped Stephen elect how much of his pay to defer into the company non-qualified deferred compensation plan to manage current and future taxation liabilities.
It was enjoyable to work with Stephen and educate him regarding proper portfolio construction, as he was quick to recognize the value of an integrated approach. When he realized the magnitude of the unnecessary risk he was previously taking, he was swift in his decision to move forward with an investment plan that properly aligned his assets with his goals.
Financial Planning and Investment Management for Prosperous Individuals, Families, and Institutions.