Case Study

Financial planning identifies the best course of action for wealth preservation and legacy goals

The ChallengeJohn and Jenny had a substantial concentrated stock position in an international materials corporation. Their other investments had suffered large losses during a recent market downturn, and they felt they were taking excessive risk. They came to us wondering how they might transfer some of their accumulated wealth to heirs and whether their current investment strategy was right for them.
The Strategy

Financial planning is the foundation of our wealth management approach, and we believe it is truly essential to our clients’ overall financial success. We guided John and Jenny through this process to better understand their unique needs and goals and identify how much risk was appropriate in light of their objectives.

Once we had a sense of everything they were trying to accomplish, we performed a detailed analysis on their concentrated stock holding and determined that they should significantly reduce their risk. We proposed a number of potential hedging and monetization strategies and ultimately established a systematic sales execution plan to diversify the position over time. These proceeds were then re-deployed within their investment portfolio which greatly reduced volatility, while increasing income to meet their cash flow needs.

We also partnered with John and Jenny’s estate planning attorney and our trust and estates specialist to fully map out their legacy plan. We agreed that in addition to the outright sale, it would be advantageous for John and Jenny to each place retained stock into a grantor retained annuity trust (GRATs) to remove potential stock appreciation from their estate.

As a multi-generational estate planning technique, we converted both of their Individual Retirement Accounts (IRAs) to Roth IRAs. This change would allow any potential future earnings to grow tax-free over John and Jenny’s lifetimes. In addition, their beneficiaries could also elect to stretch any required distributions over their own lives, increasing the longevity of the benefit.

Lastly, we helped John and Jenny establish an irrevocable life insurance trust to potentially offset some of their future federal estate tax liabilities and preserve assets that would be passed to heirs.

Our Continuing Relationship

As a result of our work, we greatly reduced John and Jenny’s concentrated risk exposure just before the stock suffered a major decline. We also helped identify numerous ways they could efficiently pass their wealth to future generations. Having earned their confidence and trust, we were referred to their two sons and have since taken them through our planning and wealth management process.

This case study is provided to illustrate the types of services Parcion can provide and the importance of our focus on individual needs and goals. The actions described do not constitute investment advice or any recommendation; we provide advice only to our clients. While the story is based on an actual client experience, it describes Parcion’s view of that experience. Not all clients experience positive results from our planning services and past performance is never a guarantee of future results.