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  • More Money More Problems? Solutions to the Puzzle of Complex Compensation


    Complex Compensation

    The benefit of becoming a high earner is apparent: more money. But this often comes with more complex compensation. 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. That means 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. It can be lumpy, or maybe you’re no longer a W2 wage earner. You may 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 investment professional who prioritizes putting the client’s interest first.

    They can recommend the right moves at the right time because they are not motivated by product or fee structures based on assets.

    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 the 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’s.

    The Role of Investment Professionals

    In these two very different situations, the common denominator is an investment professional that provides specialized services. Because those services put the client’s interests first and are not motivated by selling a commission-based product.

    But the Most Important Thing Isn’t the Money

    The role of an investment professional 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” to understand where and how to place your assets so that you can realize what you want. Maybe you seek 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 About Complex Compensation

    You’ve worked hard to be a high-earner. This brings benefits but can create another layer of complication in your life. Working with an investment professional can provide the specialized advice you need. They can put your wealth in service to your goals. This, in turn, can help simplify things, so you can think about enjoying the fruits of your labor.

    Let Hennion & Walsh Offer a Second Opinion

    Curious to learn more? Our unmatched client experience will give you peace of mind. Just as you may seek a second opinion about your health, we believe successful investors can gain value and peace of mind by getting a second opinion on their financial health. So, whether you’re worried about today’s uncertain economic environment or looking for increased peace of mind, we can help. Get a complimentary second opinion on all your retirement accounts not held at Hennion & Walsh today!

    Hennion & Walsh Experience

    We have investment professionals, planners, and portfolio managers that can collectively analyze your situation through the lens of their respective disciplines. Each member brings valuable insights to apply to your situation. Whether you are looking for income strategy guidance or growth strategy guidance, a second opinion of all your retirement accounts not currently held at Hennion & Walsh could be beneficial to your financial health.

    All investing involves risk including the possible loss of principal. Past performance does not guarantee future results. The information above is from sources that we believe to be reliable but we do not guarantee their accuracy or completeness.

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