From IPOs to Sudden Inheritances: Helping Clients Navigate the Hurdles of Cash Windfalls
Some clients may struggle to understand the consequences of holding a concentrated position with company stock. They seek our expertise about whether they should hold their shares or sell them immediately and, if they sell, how to reinvest the proceeds. Others want to know the tax implications and whether they qualify for a federal exemption. For some, company stock that comprises the bulk of their compensation plan may have lost value.
Through consistent communication, we strive to help clients understand how to grow and protect their assets. Specifically, we ensure accounts are organized, estates are properly settled, and investments are seamlessly transferred. We also connect them to a wider network of accountants, estate attorneys and other third-party professionals.
Additionally, we research companies and conduct risk assessments to gauge tax liability. By generating detailed analyses, we believe we can illustrate how market events can impair businesses. We help them understand the scope of their wealth and work to deter them from making mistakes common among the newly wealthy.
As collaborators, we offer access to what we believe are timely investing ideas and walk clients through capital markets complexities that technologically based alternatives, such as robo-advisors, may not offer. As we see it, we are trusted advocates who strive to actively identify investment opportunities — many of which clients are unaware of — and provide counsel on the latest investment trends dominating headlines.
For example, we can diversify a portfolio for someone who is sitting on a highly concentrated position with company stock simply to avoid a hefty capital gains tax. We may suggest cutting existing shares to reduce that liability for a client who has vested shares periodically coming due.
Clients are typically focused on growing and taking risks. But for those prioritizing risk management over performance, we might reserve one portion of their assets for living expenses and another for risk taking.
For sudden heirs, we can serve as a guide through a time of stress and confusion. In instances where we have already advised an heir’s parents, we may be better positioned to incorporate their specific allocation needs and risk tolerances, whether conservative or uber aggressive. If needed, we can expand our role by identifying tax efficiencies or ways to unwind exposure for heirs at publicly traded tech companies.
These scenarios present a prime opportunity for advisors to help clients navigate new terrain. For us, they create an opening to demonstrate our value with younger investors who may not be sophisticated investors but are less likely to hire an advisor. We can pick up where self-directed brokerage accounts leave off. Ultimately, we can cultivate lasting relationships, helping clients achieve the financial freedom and security they crave.
Tom Connaghan is a San Francisco Bay Area-based senior wealth advisor for Kayne Anderson Rudnick, an investment and wealth advisory firm managing assets for corporations, endowments, foundations, public entities and high net worth individuals.
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