Wealth Concentration is Your Friend…Until it’s Your Foe

Financial Planning
Wealth Concentration is Your Friend…Until it’s Your Foe
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Wealth Concentration is Your Friend…Until it’s Your Foe

I recently sat down with one of our clients who had enjoyed significant success in building their wealth through the concentration of a publicly traded company.  Throughout his twenty plus year career as an executive, he had amassed hundreds of thousands of shares of company stock representing several millions of dollars.    With a goal of winding down his career in the next 3 years and
nearly 87% of his family’s entire net worth in this single stock, it was clear the potential dangers outweighed the benefits of having a portfolio so dependent on one single publicly traded company. 

After showing the husband and wife through our Strength-Based Wealth Management™ (SBWM) process that they could not only meet but exceed their ideal lifestyle from the assets they have accumulated, I asked the following question…You can continue to take on this level of risk, but why?  In this particular case, the couple agreed it was more than time to unwind this concentration and re-allocate to a broadly diversified, risk-adjusted portfolio.  This decision released a level of tension and stress the couple had been feeling for a number of years, and offered peace of mind they would be able to weather any type of economic storm with a more balanced approach.

To be clear, concentration in a company or a business can become the catalyst to a life changing liquidity event.  We can appreciate and embrace such concentration while in the accumulation and accelerated growth phase of one’s career.  In fact, many of our seven and eight figure net worth clients have become financially independent because of their willingness to take on such risk.  But the closer one gets towards their targeted financial independence (or retirement) where they plan to start living off their assets, the risk may be too high and can ultimately torpedo one’s lifestyle if a major decline in value occurs.  It’s one thing to experience a setback early on in one’s career, but if things go wrong at the tail end, you may not have the time or ability to recover.

In working closely with many business owners and C-level executives over the last 25 years, we have successfully guided many of our clients to effectively unwind and hedge concentrated positions beyond our key standards of excellence.  Our comprehensive approach identifies and alerts when wealth concentration is your friend…and when it becomes your foe.

R. Brady Siegrist, CFP®

Brady Siegrist, CFP® is Managing Director of Wealth Management of Janiczek® Wealth Management, which exclusively serves high net worth investors (individuals with $2 to $20 million portfolios) and ultra-high net worth investors (individuals with $20 million+ portfolios) across the country.

With his Bachelor’s degree in Finance from the University of Colorado, his CERTIFIED FINANCIAL PLANNER™ professional designation and 15+ years experience in the financial services and wealth management industries, Brady brings superb technical expertise and experience to Janiczek®’s disciplined Evidence-Based Investing (EBI) and Strength-Based Wealth Management™ (SBWM) platform. Mr. Siegrist is a Partner of the firm and a member of its executive Leadership Team.

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