A wealth event is usually the single biggest event driving wealth and wellbeing. Experts across industries — trust attorneys, financial planners, charitable giving specialists, CPAs, M&A advisors and others — often reach out to our team because they understand that, whether it's the sale of a client's closely held business or an inheritance, this event is sure to impact the client's and their loved ones' long-term financial goals.

At Parcion Private Wealth, we regularly partner with allied professionals to help clients optimize wealth events and prepare for what's next through smart planning, strong advocacy and prudent investment management. We, and our partners, know that preparing for these types of occasions takes considerable time, thoroughness and collaboration – and are often thought about years before the event is expected to occur.

We also recognize that the most effective approach to meeting a client's needs involves collaborating – rather than competing – with other professionals who bring highly specialized knowledge to key service areas. We've found that this model truly puts the client at the center while providing a seat at the table to every individual who plays a role in managing the wealth event.

No matter where you and your client are in the process, managing assets generated as part of this event requires careful planning before, during and afterward. To successfully govern this situation and achieve the desired outcome, we collaborate with our partners and their clients to complete the five steps to optimize a wealth event.

01 HELPING YOUR CLIENT VISUALIZE WHAT'S NEXT

Before making any decision that may impact their future, we always ask clients what their goals are, and not just financial ones. We've heard from many executives that they felt a loss of purpose after a significant wealth event – such as the selling of their family business – because they didn't realize the extent to which the business was ingrained not only in their daily lives, but also in their identity. Once the sale was complete, they realized that instead of freedom to explore, they were overwhelmed with the lack of direction they now faced.

Avoid this conundrum with your client by helping them take stock of what makes them happy and planning for the fact that most successful entrepreneurs rely on help while working. Ask your client to think about:

• The type of lifestyle their family is looking forward to;
• Future hobbies or activities they'll need to plan for;
• If and how they'll want to contribute to philanthropic endeavors and support the community;
• Their risk tolerance and interest in other investment opportunities; and
• The ways a wealth event will change the way they manage their everyday life.

From this exercise, you and your client can begin to prioritize the wants and needs of their next chapter. Some items – such as immediate and long-term financial concerns – will be obvious from the get-go, but there are many seemingly smaller items that can cause just as much angst as the big things down the road.

For example, many business owners rely on assistants to help with planning around some of their personal activities like travel, as well as business affairs. If your client is planning to travel extensively after an upcoming wealth event, are they prepared to manage the details surrounding a trip on their own? One option would be to hire additional help or outsource some of these tasks, which may no longer be tax deductible depending on the situation.

By encouraging your client to visualize what life will be like after the wealth event, you can help them begin to unravel the different aspects of their situation, both big and small.

02 MAKING SMART DECISIONS – HAVING A GAME PLAN

For your client, looking ahead at how their life could change is an important step that leads to establishing an actionable plan for when the wealth event takes place. Based on a 2022 survey conducted by the Exit Planning Institute (EPI), of the 400 Colorado-based mid-market business owners, 52% of business owners indicated they want to transition their business within the next 5 years, 95% of the owners agree transition planning is important, yet 65% indicated they have no formal or written transition plan. Additionally, 78% indicated they do not have an exit-focused team of advisors. Other regional studies from Nashville to Arizona have similar statistics. When 80 to 90 percent of an owner's financial assets are based in the business itself, it is critical to have a team of professional advisors to support.

We know that the decision to sell is deeply personal and can be done for a variety of reasons. In our experience, the majority of business owners who are preparing for these types of wealth events have reached a point in their lives in which they are ready to focus on their personal relationships with family and friends and crave a more flexible schedule to explore new talents and lifelong passions. Others recognize increased competition in their industries and want to capitalize on market timing after years of anticipating the ebbs and flows within the space. Regardless of why, it's surprising that so many business owners would move forward without a plan in place.

As any good business owner knows, planning is essential for success. It takes a plan to get an idea off the ground and make way for profitable growth; to build a strong, reliable team focused on a core mission; and to stand out and beat the competition.

Once that period of their life is over, there needs to be a plan for how to determine what's next. We've worked seamlessly with other advisors to help dozens of business owners navigate these opportunities and ensure none of their hard-earned money is left on the table at the end of the day. Managing a significant wealth event is complex and requires extensive planning that even the savviest business owner won't have insight into, which is why individuals preparing for these types of events should do so with the right team in mind.

03 DEVELOPING THE RIGHT TEAM

No wealth event can, or should, be managed alone. While some wealth events seem straightforward, the vast majority require a 360-degree analysis of the risks and opportunities, and having a seasoned, experienced team in place is crucial.

That team can include:

• A MERGERS & ACQUISITIONS SPECIALIST OR TRANSACTION ATTORNEY: If the wealth event involves the client selling a business or rolling a business into another through a merger, we always recommend the client benefit from the recommendations of a mergers and acquisition specialist – often an attorney – and perhaps the input of a business valuation consultant. While wealth events are sometimes a once-in-a-lifetime event, these specialists have seen dozens, if not hundreds, and can readily spot potentially missed opportunities, or flag potholes that tripped up other clients in the past.
• A CPA & TRUST ADVISOR: Wealth events always have tax considerations. Thoughtful planning based on the experience of a seasoned CPA almost always returns strong dividends. This tax planning should also involve the expertise of a trust expert.
• A WEALTH ADVISOR: A good wealth advisor is the conductor of the wealth-event orchestra, working to coordinate the efforts of the team and deliver the client an integrated process to optimize the event; in short, to be an advocate for the business owner's personal wealth goals, along with those of the business itself. In doing this, the wealth advisor's key responsibility is to create a long-range financial plan that marries investment recommendations with smart planning strategies and services to help meet the client's long-term goals.

An increasing number of wealth management firms are hiring these subject-matter experts to work and provide services under the umbrella of the wealth management firm. These CPAs, trust attorneys and allied professionals offer the benefit of an integrated approach, which can allow the process to move along with speed in mind.

At Parcion Private Wealth, our approach is markedly different; for each client, we carefully analyze the needs and recommend a bespoke team, drawing from the ranks of time-tested professionals with whom we've worked. We have found that this allows for all the benefits of the one-roof approach in terms of efficiency, while also allowing us to assemble a team that is precisely task-fit for a client's particular needs. Very often, we're simply augmenting existing professional relationships the business owner has had for years—in effect, rounding out the team!

04 ESTABLISHING YOUR TIMELINE

When your client is ready to move forward, the chief consideration is timing; like any major decision or action, having the time to properly plan can make the difference between an optimal or sub-optimal event. Historically, we have found that it can take as long as three years to implement the proper steps to optimize a wealth event, which should be done with the following timetable in mind:

• PRE-EVENT DISCOVERY: Having a clear, candid and focused conversation with your client and their comprehensive team of advisors is key to a successful wealth event. We recommend a series of meetings to help identify all the potential complexities of such a transition. Gathering the quantitative data is the easy part, which involves documenting assets and liabilities, as well as known sources of income and expenses. Often overlooked, however, is the qualitative component: the family's values, goals, important relationships and philanthropic causes. A complete plan should address the "why" and not just the "what." In this way, we look at a client's current financial position, including responsibilities for family and others who may be counting on support. Then we overlay how that picture would change after a wealth event, which often provides insight into whether the timing is indeed appropriate to make the move. This is also a time to consider wealth transfer strategies that can greatly reduce estate taxes; helping your client to further maximize their legacy.
• DURING THE EVENT: If done right, progressing through the stages of a wealth event should require minimum time and effort on the client's part, as their hired team should work in lockstep on behalf of their best interest. Some items, such as signing on the dotted line, will require some special attention, but our goal is to always be one step ahead during the event itself.
• POST-EVENT EXAMINATION: It's also important to focus on other factors that could impact your client's life after the wealth event. For example, does it make sense post-event to set up a family bank or make other durable financial moves to provide support and/or financial safeguards for the client and their family? A plan most often includes forward-looking planning to minimize excess tax liability, as well as estate planning, bringing to fruition the planning completed pre-event.

05 ALIGNING THE PICTURE WITH THE REALITY

No matter how well thought-out a business owner's or entrepreneur's plans may be, there is almost always the need for minor adjustments along the way. We've worked with dozens of clients who have had a clear picture of their post-wealth-event life and, once there, realized that their picture of life moving forward needed an occasional course correction.

Recognizing that things change and having a team ready to help make these things possible, and friction-free, can make a big difference in the final leg of your client's wealth event journey.

Taking this time to reflect after the wealth event also helps to ensure that the nuances of your client's visualized plan come to fruition. As we discussed above, many aspects of their life can and will change through this process. Former executives can spend more time outside of the boardroom, capitalizing on new adventures. Family bonds can be strengthened, and new friends can be made. New investment opportunities can be explored. With the right team, plan and timing, anything is possible.

CASE STUDY

We met Bob and Nancy about three years ago, when they came to the conclusion that it was time to think about what's next.

The family had begun a small business about a decade ago, developing and creating high-end promotional items. The business had steady if not unspectacular growth for years, until about five years ago when the organization entered into an agreement to supply a national customer with a test order to see whether the items would be attractive to a broader market. They were— in a big way.

Over the course of a few years, their business – and profits – exploded. Through hard work and leveraging their savvy business know-how, Bob and Nancy avoided many of the perils that companies trip over during rapid expansion; they locked in their supply chain, were able to increase production capacity and met or surpassed customers' expectations. In fact, the business' success was so significant that their operation attracted the attention of a number of suitors, each of whom offered them a path to parlay their success into a wealth event well beyond what they thought possible.

When Bob and Nancy came to Parcion, they wanted to make sure they got this wealth event right – they knew it would probably be the last, crucial move they would make to guarantee their financial future, and that of their three kids, the first of which was about to leave for college.

We explained that to manage their wealth event properly, we realistically needed 24 months to engineer the perfect transition. We called together a team of vetted subject-matter experts, including a CPA and trust attorney with whom we've orchestrated dozens of wealth events. After a series of meetings with the family, we developed a sequence of strategies including:

PRE-EVENT PLANNING

We have seen people who sold businesses without thoughtfully planning, thinking that the other side would be everything they dreamed of, when in fact, it offered discontent.

We also make sure that our clients recognize that their businesses served their needs, and the proceeds from the sale must, similarly, serve their needs moving forward. That includes the financial aspects – will the cash flow be sufficient? – and also involves a frank discussion about what life looks like without an office to visit, or an assistant to help coordinate activities.

WEALTH TRANSFER

Once we determined what it would take to build a "brick wall" around Bob and Nancy's cash flow needs and legacy goals, the next big objective was to address the significant estate tax exposure their wealth had created. At a top marginal tax rate of 40%, estate taxes could quickly consume a significant part of the legacy they had worked so hard to build, not only for themselves but also for the generations by whom they would be remembered.

To protect their family's best interests, we worked with a valuation expert well in advance of the sale to transfer a portion of the company's shares to legacy trusts for each of their children. This move mitigated their estate taxes legally and efficiently by capitalizing on the shares' significantly discounted values compared to their eventual sales price. Most importantly, it enabled Bob and Nancy to create a support system for future generations, while saving a great deal in future estate taxes.

TAX REDUCTION

The sale of Bob and Nancy's business would certainly be a significant tax event for them, perhaps the largest in their lifetimes, but also an opportunity to safely avoid overpaying. Among the steps we took for this family was creating a donor-advised fund, allowing Bob and Nancy to continue to support causes important to them, and in doing so, significantly reducing the taxable portion of their windfall.

FAMILY BANK

Bob and Nancy were concerned that this wealth event might affect their children negatively. They had seen examples of how some families of wealth faced challenges in keeping their children engaged academically. They had heard the term affluenza and were keen to do everything possible to engender their growing kids with the same qualities that afforded their own success. In addition to the legacy trusts their children would have access to in the future, we created a family bank that would permit their children to draw on accounts that met Bob and Nancy's criteria, but also would incorporate enough latitude to encourage and support entrepreneurial activities.

SUPPORTING WHAT'S NEXT

Finally, we had a strategy in place supporting Bob, Nancy and their family as they embarked on what's next. Our team helps them manage their joint finances, affording them unfettered transparency into their investments. We meet monthly with Bob and Nancy—either in-person or virtually—to review our progress.

We also continue to help them manage some of the complexities that their wealth event has created using a family office model. We arrange travel for them, and after understanding their family's preferences, we assist in their tourism and general aviation needs.

In addition, Bob knew that his elderly mother would need increasing levels of care. We worked with the pair and an elder care expert to arrange and fund a plan that ensured his mother would have the best, personalized care possible. On health care, we also arranged for Bob and Nancy to move the management of their family's day-to-day health and wellness needs to a concierge medical group we work with.

FOCUSING ON THE FUTURE

Three years after this family's wealth event, we continue to meet regularly to evaluate Bob and Nancy's needs and ensure their plan aligns with their goals; updating and adjusting as needed.

When they aren't traveling or spending time with their now-adult children, Bob and Nancy enjoy the lifestyle they worked so hard to create, while resting assured that their children and eventual grandchildren will have controlled access to the resources they preserved through their wealth event.

Through our time-tested combination of investment management, smart planning and trust-based client service, Parcion helped Bob and Nancy navigate not only their life-changing wealth event, but more importantly, what came next.

This case study is for illustrative purposes only and discusses factors Parcion commonly encounters with clients. "Bob and Nancy" represent a composite of circumstances and do not represent the experience or views of any actual Parcion client. The strategies and solutions described may not be appropriate for clients in similar or different circumstances. This case study is not intended as investment advice, or legal or tax planning advice. Not all clients achieve positive results or meet the goals they've set in connection with liquidity events.