More Money More Problems? Complex Compensation Requires a Different Kind of Advisor

Courtney Jones, CFP®
Posted on 
May 18, 2022

More Money More Problems? Complex Compensation Requires a Different Kind of Advisor

The benefit of becoming a high earner is apparent: more money. You can go beyond creating financial security for yourself and your family and start making choices that may have been out of reach. Not having to worry about covering the basics can also provide you with a measure of peace of mind. It can help you operate from a mindset of abundance, and not scarcity, which can free you to actualize your financial and personal goals.

But before you get to that state of satori, you need to get all the money you’ve earned into your financial plan in a reasonably efficient way, while minimizing the taxes you’ll pay across your lifetime, and creating a diversified financial plan.

And if that's not complicated enough, being a high earner very often means your compensation is unpredictable, lumpy, or you're no longer a W2 wage earner. Whether you have deferred compensation, restricted stock, stock options, an annual bonus, or you own your own business, high income levels can equate to situations in which you have very complex compensation.

How do you simplify it? Who can help? It turns out that the answers to those questions are interrelated. Simplifying your wealth and your life, and creating a diversified, fully-realized financial plan requires an advisor with specialized skills who prioritizes putting the client’s interest first and can recommend the right moves at the right time.

Understanding Complex Compensation

Depending on the type of compensation you have, the way you need to address it is different. Executives with stock in public companies will have different needs than employees of start-ups that haven't gone public yet or are in early stages. The type of equity compensation you hold will dictate the strategy you need to put in place.

With equity compensation, two things are most important:

• Making sure you clearly understand all of the regulations and deadlines you’ll need to meet

• Planning for paying the taxes, and minimizing the impact

Equity compensation is never a "one and done." Your options will have a vesting schedule, and you'll have to make serial decisions on what to do with them. Whether you exercise, if you want to continue holding, or if you want to sell are all things that will come up every quarter, and you'll need to think about them in the context of three things:

• Your cash flow needs

• Your retirement planning

• Diversifying your portfolio

Just because you have equity compensation, you can’t neglect retirement savings. You also need to think through ways to diversify your portfolio to avoid an overconcentration in company stock.

If your equity is a little closer to home, meaning if you own your own business, you may have an even more complicated picture. Your retirement plan is often an exit or succession event in your business, and the time horizon for planning for that is long. You'll need to be sure you are building personal wealth outside of your business. And because your wealth is tied to your company, your risk profile will look very different from the typical investor.

The Role of Financial Advice

In these two very different situations, the common denominator is an advisor that provides specialized advice that puts the client's interests first. A  fiduciary advisor isn't motivated by selling a product. Handling equity compensation, diversifying a portfolio with a real estate investment, advising a business owner on how to set up a qualified retirement plan, or planning for a sale are all possible when  advice is at the core of the relationship.

But the Most Important Thing Isn’t the Money

The role of a financial planner is to look across your entire financial plan and understand what you want to achieve. You aren’t working for money, you’re working for your family, to create a life you love, and to have the option of “buying time.” A financial advisor with a planning focus can understand where and how to place your assets so that you can realize what you want, whether that's early retirement, a work-optional mindset, or some other goal that is meaningful to you. Simplifying your complex compensation is just the first step in creating a comprehensive financial plan that allows you to live the life you want.

The Bottom Line

You've worked hard to be a high-earner, and it brings benefits but can create another layer of complication in your life. Working with an advisor that can provide the specialized advice you need while putting your wealth in service to your goals can help you simplify things, so you can think about enjoying the fruits of your labor.

More Money More Problems? Complex Compensation Requires a Different Kind of Advisor

Courtney Jones, CFP®
Posted on 
May 18, 2022
More Money More Problems? Complex Compensation Requires a Different Kind of Advisor

More Money More Problems? Complex Compensation Requires a Different Kind of Advisor

The benefit of becoming a high earner is apparent: more money. You can go beyond creating financial security for yourself and your family and start making choices that may have been out of reach. Not having to worry about covering the basics can also provide you with a measure of peace of mind. It can help you operate from a mindset of abundance, and not scarcity, which can free you to actualize your financial and personal goals.

But before you get to that state of satori, you need to get all the money you’ve earned into your financial plan in a reasonably efficient way, while minimizing the taxes you’ll pay across your lifetime, and creating a diversified financial plan.

And if that's not complicated enough, being a high earner very often means your compensation is unpredictable, lumpy, or you're no longer a W2 wage earner. Whether you have deferred compensation, restricted stock, stock options, an annual bonus, or you own your own business, high income levels can equate to situations in which you have very complex compensation.

How do you simplify it? Who can help? It turns out that the answers to those questions are interrelated. Simplifying your wealth and your life, and creating a diversified, fully-realized financial plan requires an advisor with specialized skills who prioritizes putting the client’s interest first and can recommend the right moves at the right time.

Understanding Complex Compensation

Depending on the type of compensation you have, the way you need to address it is different. Executives with stock in public companies will have different needs than employees of start-ups that haven't gone public yet or are in early stages. The type of equity compensation you hold will dictate the strategy you need to put in place.

With equity compensation, two things are most important:

• Making sure you clearly understand all of the regulations and deadlines you’ll need to meet

• Planning for paying the taxes, and minimizing the impact

Equity compensation is never a "one and done." Your options will have a vesting schedule, and you'll have to make serial decisions on what to do with them. Whether you exercise, if you want to continue holding, or if you want to sell are all things that will come up every quarter, and you'll need to think about them in the context of three things:

• Your cash flow needs

• Your retirement planning

• Diversifying your portfolio

Just because you have equity compensation, you can’t neglect retirement savings. You also need to think through ways to diversify your portfolio to avoid an overconcentration in company stock.

If your equity is a little closer to home, meaning if you own your own business, you may have an even more complicated picture. Your retirement plan is often an exit or succession event in your business, and the time horizon for planning for that is long. You'll need to be sure you are building personal wealth outside of your business. And because your wealth is tied to your company, your risk profile will look very different from the typical investor.

The Role of Financial Advice

In these two very different situations, the common denominator is an advisor that provides specialized advice that puts the client's interests first. A  fiduciary advisor isn't motivated by selling a product. Handling equity compensation, diversifying a portfolio with a real estate investment, advising a business owner on how to set up a qualified retirement plan, or planning for a sale are all possible when  advice is at the core of the relationship.

But the Most Important Thing Isn’t the Money

The role of a financial planner is to look across your entire financial plan and understand what you want to achieve. You aren’t working for money, you’re working for your family, to create a life you love, and to have the option of “buying time.” A financial advisor with a planning focus can understand where and how to place your assets so that you can realize what you want, whether that's early retirement, a work-optional mindset, or some other goal that is meaningful to you. Simplifying your complex compensation is just the first step in creating a comprehensive financial plan that allows you to live the life you want.

The Bottom Line

You've worked hard to be a high-earner, and it brings benefits but can create another layer of complication in your life. Working with an advisor that can provide the specialized advice you need while putting your wealth in service to your goals can help you simplify things, so you can think about enjoying the fruits of your labor.

Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC. Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC.  Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. Credo Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC. This work is powered by Seven Group under the Terms of Service and may be a derivative of the original. More information can be found here.This communication has not been reviewed for completeness or accuracy, does not necessarily reflect the views of Sanctuary Securities, Inc. or Sanctuary Advisors, LLC., and is not a recommendation or endorsement of any product, service, or issuer. For additional information, please refer to one of the following consumer websites: www.FINRA.org, www.SIPC.org.

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