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Financial Planning for Liquidity Events

We have a few clients who were all referred to us a few years ago by their company comptroller who heard us speak.

The three of them owned 22% of a successful business which was being bought out by a larger corporation, and they were each receiving approximately $13-million pre-tax from the deal. The comptroller, George, recommended they speak to us regarding managing their new found wealth. In their minds, they were looking for an investment advisor.

When we met with them, we told them a little bit about how we work, and how we will often look at a person’s compensation structure and net worth well before we start talking investments. Often we can find significant tax savings, which means more to save and/or spend.

So we steered the conversation away from portfolio management, and we asked several questions about the sale transaction of their business, as well as about their joint holding company. Keep in mind that as far as these three gentlemen were concerned the sale was a done deal, they weren’t aware there was room for improvement.

We then showed on the back of a napkin that if each shareholder created his own holding company to receive a portion of the proceeds from the sale, it would save them over $3.5-million in taxes now, as well as significantly reduce future tax on investment income.

Additionally, we recommended a skilled accountant for them to work with to help with the corporate restructuring.

By asking the right questions and digging deeper we were able to provide them with much more than they were looking for.

This depiction is hypothetical in order to illustrate a potential client’s experience. This scenario is not to be viewed as a guarantee of investment performance.