By Kevin Boutwell, CFP®, CIMA®

Veracity Capital Wealth Advisors provides personalized financial strategies to corporate executives, business owners, high-income earners, and people planning to retire. The following case study demonstrates how we helped create a financial strategy for a corporate executive new to wealth management advising.

Executive Summary

A technology company executive new to the C-suite with higher compensation and the highest tax bracket successfully built a financial plan to diversify away from a concentration in company stock, boost his retirement savings, reduce his taxable income, and create a trust to pass wealth to the next generation.  

Client Background

George Miller (1) works for a recently acquired technology company and came to Veracity Capital Wealth Advisors needing the services of a wealth management advisor. He was prompted to seek out an advisor after receiving a promotion to the C-suite which significantly changed his compensation, increased his income, and added stock as 50 percent of his compensation.

George and his wife, Nancy, (2) who does not work outside the home, have two children who recently completed college. Historically they had saved well and lived modestly, so George had been DIY-ing his finances for years. However, over time and with the promotion, his finances became increasingly complex. George decided it was time to seek professional help to get his questions about retiring in the next 10 years answered. 

In addition, he was now offered Non-Qualified Deferred Compensation (NQDC) and a Voluntary Equity Incentive Program (VEIP) with a 50 percent match—leading to questions about enrolling and how these programs might impact his taxes.

George also hoped to pass along to family members some of the new potential wealth generated by the higher income and additional stock, so he wanted it structured in a way to teach them about finance.  

Case Evaluation

With 50 percent of George’s compensation paid out as company stock, half of his income going forward would be tied up in one stock, creating a risk if something adverse were to happen to the company. The goal was to realign the investment portfolio to account for this overconcentration and position it for growth to meet long-term goals. The evaluation of the investment mix also included analyzing whether George should participate in the Voluntary Equity Incentive Program.

His compensation of higher income and company stock could potentially have a positive impact on his ability to retire in 10 years. We evaluated George’s cash flow and savings given the increased income to assess the retirement lifestyle the money would accommodate.

With his participation in the Non-Qualified Deferred Compensation and position in the highest tax bracket, we reviewed the impacts of the NQDC and George’s retirement investments.

We also reviewed which financial vehicle might be best suited for passing a gift to George’s family members from the potential wealth to come from his higher compensation. 

Proposed Strategies

After analysis, we determined George should participate in the Voluntary Equity Incentive Program. Given that he already receives restricted grants annually, participating in the VEIP would further increase his exposure to company stock. However, we have determined that the benefits outweigh the risks, particularly due to the 50% match on any stock purchased through the VEIP. To address the potential overconcentration resulting from his participation in the VEIP, we changed his investment strategy to sell the restricted stock immediately after it vests to diversify his stock concentration.

We built a cash flow and savings plan based on the higher income to provide George and Nancy with a comfortable retirement.

We were able to reduce the Millers’ tax burden in two ways:

• Use the NQDC while George is in the highest tax bracket, and then withdraw from the plan later when he is in a lower tax bracket.
• Lower George’s taxable income by switching from a Roth 401(k) (which taxes contributions going in) to a traditional 401(k) (which allows contributions on a pre-tax basis). The plan calls for converting the traditional 401(k) partially each year back to a Roth account in 10 years when he is in a lower tax bracket.

Finally, we established a trust for George with the intention of providing for his family members. To address any concerns regarding the ability of younger family members to responsibly manage the assets, the trust incorporates specific restrictions. These limitations are designed to control investment growth and restrict withdrawals during the initial years, ensuring a prudent and measured approach to the management of the trust assets. 

We were able to demonstrate to George how he could reduce risks from his stock compensation, retire in 10 years with more money, lessen his tax burden, and pass wealth to his family.

Get in Touch

As a corporate executive, you’re busy running your company. While you likely have the skills to handle your financial planning, you probably don’t have the time. Let Veracity Capital Wealth Advisors help.

If you’re interested in learning more about how I serve my clients, I encourage you to contact me today for a no-obligation get-acquainted meeting. Reach out to me at 678.888.4952 or kevin.boutwell@veracitycapital.com to get started.

About Kevin

Kevin Boutwell is a wealth advisor and partner at Veracity Capital. With a decade of experience in the financial industry, Kevin has acquired expertise in managing equity compensation. He focuses his services on corporate executives who have complicated compensation packages and resulting tax headaches. He believes that proper financial planning drives the best investment decisions, and his customized processes and strategies help his clients achieve better outcomes. Kevin prioritizes building meaningful relationships and offers the perfect mix of analytical, problem-solving, and personal touch so his clients can focus on what’s important while knowing their finances are taken care of. 

Kevin is a highly decorated veteran and former U.S. Navy pilot. He got his start in the financial industry at Goldman Sachs and is a CERTIFIED FINANCIAL PLANNER™ practitioner and Certified Investment Management Analyst®. Kevin earned his Bachelor of Science in Mechanical Engineering from the Georgia Institute of Technology and an MBA from Indiana University’s Kelley School of Business. Out of the office, you can find Kevin staying busy with his family, including his young triplet sons. He stays involved with several non-profit veteran organizations and is on the Board of Directors of the Cobb County Public Safety Foundation.  When he has a spare moment, he enjoys staying active with CrossFit and an occasional round of golf. To learn more about Kevin, connect with him on LinkedIn.

Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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(1) Name changed for confidentiality purposes

(2) Name changed for confidentiality purposes