“I want to reduce the risk of owning so much of my family’s net worth tied up in one company.”
Some problems with owning too much of a single company:
We search for and then monitor investments that move differently from each other and from your single stock. The lower the correlation, the more differently one investment moves from another. A negative correlation means that an investment may rise while another investment declines. This makes it possible for us to divest from your single stock position.
Discovery, understanding what means the most to you and your family. This includes your goals, values, relationships and more.
Understand and explain the risks of the single company.
Build a portfolio of low-correlation investments around the single stock.
Regularly looking for opportunities to harvest investments with losses to offset the taxable gains in the single stock.
Ongoing financial management. Track the investments, and take advantage of opportunities that may present themselves.
Dylan is a conservative midwestern family man. He grew up on a farm, but after graduating college, he went into the corporate world. Dylan then worked his whole life for the same large company. He retired several years ago but never sold his shares in company stock. He was unsure about the taxation, and unsure about the other risks he could face. Over the years, Dylan had attended numerous financial advisor seminars. He had read many things on the internet, in magazines and newspapers as well. Recently, Dylan was referred to us from another financial advisor who knew our expertise. We started out providing advice for his single stock portfolio, and how to unwind these positions with less taxes. Quickly, the conversation grew into a deeper conversation about the meaning of money.
We:
Completed a discovery meeting
Gathered all of the information from all the various sources
Learned about the ownership of his shares, some of which were in his company’s retirement plan
Shared with Dylan several paths for him to choose from
Made it clear to Dylan the pros and cons of each path
And we educated him and his wife about advanced planning opportunities that he had heard about, but never completely understood
Dylan says “you guys are a lot of fun to work with and I really appreciate your camaraderie and knowledge.” Dylan chose a middle-of-the-road financial path that reduced his taxes but did not cause too much complexity. Plus, he has the opportunity to make gifts to charities and, someday, bequeath a family foundation. He says, “pretty good for a farm boy.”
Owning too much of your net worth in a single company can be dangerous for your long-term financial plans. To reduce your risk, we follow a 5 step process that begins with a discovery conversation. Then we analyze the single stock and make prudent decisions about the right amount of risk to take. Then we build a portfolio around that single stock of low correlation investments.
As time passes, some of these investments will experience short-term losses. We periodically harvest these losses and build up a reservoir of tax losses. Before the end of every tax year, we sell some of the single stock tax-free. And we provide ongoing financial management, looking for other opportunities, staying ahead of changes in tax law, providing advanced financial planning along the way.
Our wealth management approach may be different from experiences you have had with other advisors.
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