Entrepeneurs and Concentrated Wealth
Individuals who suddenly find themselves wealthy join Sand Hill Advisor’s client base. Take Robert*, for example. Due to a highly successful IPO, Robert and his wife, Joan*, found themselves suddenly wealthy and suddenly stressed. They wanted to take care of their family, especially their children, but did not want to skew their children’s values and sense of financial responsibility. Additionally, their sudden wealth set up expectations from their respective family members and friends. Siblings, parents and in-laws assumed that Robert and Joan should pay for all sorts of things -- – college educations, family vacations and fancy gifts -- now that they were extremely wealthy. Equally concerning was the high-concentration of the couple’s new found wealth in Robert’s stock. Robert and Joan were deeply concerned that a misstep might eventually reverse the wealth they had so recently acquired.
An attorney who worked with Robert’s company on the IPO recommended Robert and Joan talk to Sand Hill Advisors, experts in Investment Planning and Risk Management.
Comprehensive Needs Evaluation
The first thing we did was to conduct a Comprehensive Needs Evaluation. This included working with Robert and Joan to define their values and goals and their willingness to accept various kinds of risk. This discovery phase helped them to see that they had a very highly concentrated portfolio that was limited by constraints regarding the stock, restricted stock and stock options held therein. We next identified the couple’s three primary objectives: 1) further education about their investment options and strategies to help balance their portfolio; 2) a comprehensive estate and philanthropic plan; and 3) tools and ideas for talking with their children about money, as well as tips on negotiating with friends and family who might attempt to pressure them for financial assistance.
Portfolio Creation and Growth With a Wealth Management Team
Based on the results of the comprehensive needs evaluation, Robert and Joan were assigned their own personal Wealth Manager. That individual involved legal and tax professionals whose expertise was well matched to the couple’s specific needs, and that team developed a plan to diversify Robert and Joan’s highly concentrated portfolio.