Corporate Executive Transitioning to Business

A forty-eight year old marketing executive was starting his own venture after two decades with a multi-national firm. The complexity of this major life transition prompted him and his wife to seek professional advice, and a second opinion on their sizable investment portfolio.

The Situation

  • Senior executive transitioning to start a real-estate development business
  • Concerned with how this will impact the family’s financial security
  • Wanted help prioritizing expenses and establishing a realistic budget
  • Needed affordable financing to start his venture
  • Expected to fully fund college expenses for three children
  • Portfolio highly concentrated in U.S. equities

Our Approach

  • Helped define essential and discretionary expenses
  • Created a sophisticated financial plan to:
    o develop a strategy for immediate expenses
    o evaluate health of the long-term financial plan
    o conduct life and disability insurance needs analysis
    o conduct Monte Carlo analysis to stress test various economic scenarios
  • Established a margin account for flexible borrowing at a rate significantly lower than a bank construction loan
  • Switched existing college saving strategy from taxable accounts to tax-free 529 plans
  • Consolidated existing real estate debt into one lower interest mortgage
  • Rolled over $1 million from old employer’s retirement plan to an IRA in order to access more diversified investment options
  • Positioned the new portfolio for maximum tax efficiency by placing the bonds and alternative investments inside the IRAs
  • Converted over $120,000 in IRA assets to Roth IRAs over the two low income tax years before the business generated substantial profits
  • Established an Individual 401(k) for the new business once profits were generated

Collaboration with Specialists

  • Introduced client to a real estate attorney to create an LLC for the new business
  • Worked with a lender to establish a business line of credit and refinance the personal mortgages
  • Introduced client to a new accountant who specializes in small business owners
  • Consulted with an independent life and disability insurance agent to tailor coverage to the new needs of an entrepreneur
  • Introduced client to an estate planning attorney to create a comprehensive plan

Significant Results

  • Sufficient liquidity and financing for the new business
  • Reassurance that they are on track for their planned retirement and long-term goals even with a change in career path
  • Increased confidence in ability to meet college saving goals
  • Robust team of professionals to address current and future planning
  • Well-diversified portfolio better aligned to meet their financial aspirations