Sometimes executives are able to negotiate retirement health-care benefits or a related stipend into their compensation package—a significant advantage from a planning perspective. For those who find themselves without adequate health-care coverage, their options can be limited. Depending on how retirement assets are structured, sometimes your client can secure tax advantages or less expensive health insurance. As their advisor, you can help design a strategy to cover the expenses and minimize the impact on larger retirement savings.
Tax Implications
Taxes play a role in every single decision you make for a client. For executive clients, tax strategy becomes an even larger component in the planning strategy. Tax implications come down to whether clients want to pay taxes now or later, specifically whether they will be in a higher tax bracket in the future.
As with all clients, advisors are forced to make educated guesses on how the tax picture may evolve, especially as political administrations change hands. It is up to you to have the right conversations with clients and ensure they see the full tax picture now and well into the future.
The Takeaways For Your Practice
As with all clients, advisors who continually show their value and go above and beyond will be most successful—and their clients will be, too. Here are the top takeaways for advisors who work with or wish to work with executive clients:
1. Perform scenario-based planning. Know your clients’ plan and help them understand it. Executive compensation packages are complex, making it difficult to understand the short- and long-term implications of certain decisions. As the advisor, it’s important that you work closely with your executive clients to understand the full benefits offered and perform scenario-based planning to demonstrate how minor details can make a major impact.
2. Understand where you can and cannot help them negotiate their package. While certain details, like stock ownership structure and offerings, are fairly straightforward, there are certain aspects that can be negotiated to best position your clients for the future. In our experience, executive clients have the opportunity to negotiate more as they get closer to retirement—decisions like when to vest or whether health insurance is fully paid or via a stipend. Take advantage of these opportunities to optimize the plan.
3. Align with your client’s other professional partners. Creating strategic partnerships with your client’s network of professional partners is essential to their long-term success. For example, working closely with the client’s CPA ensures a strong line of communication and minimizes tax implications for the client with the tax professional’s guidance. These relationships help maintain a comprehensive view and strategic approach.
4. Inspire action. A financial plan is only as good as the paper it is written on if there is no action on its components. Leave no stone unturned when assessing your executive clients’ financial picture and strive to think outside the box with your planning strategies. Executives bring a complex financial picture and require creative and actionable planning strategies to optimize their financial picture. If clients and advisors don’t work together to take action on the recommendations, planning is a fruitless effort.
If you hold yourself out as a financial planner, you must be willing to take a holistic approach with your clients. Advisors will often defer to investments as the starting point but the real value is shown when you demonstrate to a prospect that you understand their situation, needs and goals. Executive clients in particular are seeking comprehensive planning. Being responsive and integrating them into your service model quickly and efficiently will help you win their business.
Zac Beckerley, CFP, is a wealth manager for Merit Financial focusing on investment growth and income strategies through comprehensive financial planning.