How Technology Companies Can Help Executives Manage Wealth

Jean Jacques Borno is the founder Benjamin’s moneyJean is a CFP™ Professional and holds an MBA from UVA Darden School of Business.

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For technology companies to compete, they must retain and attract talented CTOs.

But tech CEOs find managing their finances difficult—and stressful. Many tech leaders devote most of their available waking hours to the company, working 50 to 80 hours a week to help the organization succeed, leaving little time for family, friends, community, spiritual life, and personal finances. They may also have most of their wealth tied up in stock in just one company.

That’s why some companies have implemented executive planning to help develop the pool of top talent in their companies.

What is executive planning?

Executive planning includes employee benefits such as financial planning, stock option plans, and automatic diversification plans. These employee benefits are crucial for CTOs who manage large investment holdings ranging from $500,000 to $25 million.

These executives include a CEO, who sets the overall vision for the company; a CFO, who optimizes the profit and loss statement and communicates financial strategies to investors; and a vice president of marketing, who sets brand and digital strategies to connect with customers and creates PR campaigns.

Executive planning works the same way for executives’ personal finances: Executives themselves are the CEO of their finances. Their financial advisor serves as the CFO of their finances. (Many top financial advisors hold professional designations such as Certified Financial Planner® (CFP®), Certified Investment Management Analyst® (CIMA®), Certified Private Wealth Advisor® (CPWA®), or Chartered Financial Analyst® (CFA®), or a combination of these designations. A financial advisor can also help recruit and manage relationships with key members of his or her wealth team.

As executive wealth approaches $2 million to $5 million, it may be necessary to add a probate lawyer, a trustee, an insurance specialist, and a tax expert to the estate team.

Some forward-thinking companies may offer executive planning services to their employees, which could be an added benefit that can help tech companies retain top talent and reduce financial stress. Finance companies and discount brokers can be good service providers.

Tech companies looking to offer these types of services to their executives should partner with them to ensure they hire someone their executives feel comfortable with and who will help them manage money for generations to come.

What are the key elements of executive wealth management?

Before we begin discussing wealth management tools, let’s look at two key elements of sound wealth management.

1. Financial plan: The best financial plans address at least three main questions: What do you want to achieve? When do you want to achieve it? And what are your resources? A financial plan analyzes your income, financial assets, liabilities, insurance needs, family goals, taxes, retirement goals, and estate planning.

2. Investment Policy Statement (IPS): IPS is the blueprint and business plan for investment management. IPS describes your risk tolerance, your investment assets and how your investment portfolio is allocated across stocks, bonds, cash and alternative asset classes.

These two plans work hand in hand. The financial plan is what you want to do, and the IPS is how you manage and monitor your investment plan.

What issues should you consider when managing technology stocks?

When companies talk to broker-dealers, trust companies and investment firms about executive planning services, they should ask whether the provider has experience with automatic diversification plans or 10b5-1 plans. These plans automatically diversify investments by allowing “corporate insiders” and tech executives to systematically sell company stock over time. It’s also important to contact the company’s benefits department or a wealth or tax advisor for details on how these plans work.

It is also important to understand Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs).

• ISO certificates are intended for employees only. They have a minimum holding period of two years and typically expire within 10 years. ISOs can be taxed as capital gains but may be subject to the alternative minimum tax, so check with your tax advisor about the timing.

• Directors, employees and consultants may receive NSOs. They have a minimum holding period of one year, and the expiration date is set by the issuing company. They are usually taxed as ordinary income, so the seller must reserve a portion of the sale proceeds for taxes. Check with your benefits department and a tax advisor to calculate your taxes.

Broker-dealers (such as RBC Clearing & Custody and Fidelity) and some discount firms can help companies implement equity plans. If your firm offers these benefits, great. If not, the firm can issue a request for proposal (RFP) for these benefits to broker-dealers or financial planning firms.

Additionally, technology executives can consult with investment firms on how to best optimize employee stock plans, retirement plans and financial planning strategies for executives.

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