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  • 1. Executive WealthSUCCESSFUL PLANNING FOR EVOLVING NEEDS INTRODUCTION 2 DEVELOPING EXECUTIVES 4 ESTABLISHED EXECUTIVES 7 TRANSITIONING EXECUTIVES 12 CHOOSING A TEAM WITH GOOD BUSINESS SENSE 15
  • 2. Corporate Executives SUCCESSFUL PLANNING FOR EVOLVING NEEDS AS A CORPORATE EXECUTIVE you face unique wealth challenges and opportunities. A complex earnings package. Concentrated stock positions. The likelihood of liquidity events. In addition, your wealth management needs are continually changing, reflecting whether your career path is under development, well established or heading toward retirement. Consequently, each stage of your executive growth is accompanied by its own distinct planning imperatives (Exhibit 1). Managing these requirements has never been easy, but it can be particularly perilous today. Slow economic growth, policy headwinds, global economic frailties and unpredictable investor reactions have created a market of extreme volatility. Furthermore, tax policy shifts and a changing compensation environment are creating an even greater need to remain vigilant and plan accordingly. Yet, the relentless demands of your career leave little time to manage your wealth. Like many executives, you may be putting your own affairs on the back burner while you move forward with the next project, the next quarter or the next deal. But one “next” leads to another, elbowing aside your free time. Your energies, by necessity, are devoted to developing a business, not your personal financial plan—let alone one that involves the complexities of executive wealth. But planning has never been more crucial. The Importance of Planning Early and Often Regardless of where you are on the corporate path, it is important to thoroughly understand the various stages of executive life, including the interconnected financial factors that can help you leverage opportunities and address constraints. The good news is that it’s neither as difficult nor as time consuming as you might believe. It helps to work with a knowledgeable advisor who is familiar with the distinct characteristics of corporate wealth. By doing so, you can optimize your limited time while gaining the information you need to develop a thoughtful plan and chart a successful course. In short, it’s critical to take control. And it’s never too soon to start.2
  • 3. Exhibit 1 Executive Evolution—Planning Imperatives at Every Stage ISSUES IMPERATIVES Developing The Early Mover Advantage • Undefined long-term goals • Identify long-term goals • No plan to maximize current assets or achieve • Understand and make the most of long-term goals what you have • Cash flow and liquidity constraints • Create a long-term plan • Concentrated positions, exacerbated by IPO lockups Established When Details Matter Most • Shifting goals and growing risks not accounted • Refine goals for in long-term plan • Understand what you have and what you need • Multiple, disconnected investments • Refine plan • Increasingly complex compensation; lack of • Explore and prepare for philanthropic and a master plan family intents • Expanding responsibilities and extreme time • Develop and execute concentrated wealth strategy constraints • Create executive compensation master plan Transitioning Perfecting The Plan For What’s Next • Reactive vs. long-term, coordinated plan • Confirm goals • Inattention to key issues, including concentrated • Execute plan positions • Implement concentrated wealth strategy • Lack of executive compensation “cash out” strategy • Execute executive compensation master plan • Little planning for post-retirement pursuits • Implement wealth protection and transfer strategies • Incomplete wealth transfer and family • Create retirement liquidation plan governance plans3
  • 4. Developing Executives GAINING THE EARLY MOVER ADVANTAGE EXECUTIVE WEALTH PLANNING SHOULD BEGIN the moment your executive career does. Some might even argue that the initial planning stages are the most critical of all. Missteps or missed opportunities in the early days of your executive career may significantly compromise your financial success in the years to come. Whether you’re at a private firm anticipating an initial liquidity event or on an upward trajectory at an established public company, you face wealth management challenges and opportunities that are unique to this cornerstone phase. For example, you may have substantial cash flow and liquidity constraints. You may have a limited window in which to make important estate decisions or benefit elections, or implement strategies that are best suited for low interest rate or declined market environments. Or you may lack an overall investment strategy that considers both your employment-related and other personal assets. Adding to the muddle are compensation packages such as 401(k) savings plans and Supplemental Executive Retirement Plans, plus, of course, salary, stock and bonuses. It may seem premature to establish a long-term plan during this early period, particularly when so much of what lies ahead is unknown. Even those who recognize the need for wealth management may find that every spare minute is spent on business plans rather than on their own wealth management strategies. As a result, many executives at the start of their career lack long-term goals and plans. The consequences of such inaction can be ruinous. A solid financial foundation is critical to constructing a successful future. Here are three basic measures to help you begin building one: Keys to IDENTIFY YOUR LONG-TERM GOALS Building a UNDERSTAND AND MAKE THE MOST OF WHAT YOU HAVE Successful Future CREATE A LONG-TERM, INTEGRATED PLAN4
  • 5. Identify Your Long-term Goals Take the time to identify the long-term personal and financial goals that will drive your plan. Clearly define the former and quantify the latter—even though you realize both will evolve. Keep your goals as aspirational or concrete as desired. Ask the big, basic questions about your career and your life. Define points where you may want to change direction or retire. MAKING THE MOST OF EXECUTIVE And be sure to look beyond your own needs to those of your BENEFITS FROM THE START family or the future family you envision. By setting goals, you not only structure your thinking, but also lay the groundwork for future planning and decisions. Kate has accepted an executive Understand and Make The Most of What You Have position at a public company with a substantial compensation package and It is important to fully understand your retirement plan, a variety of executive benefits. She compensation benefits, earnings and investments in order to has some major decisions to make— optimize them. Each asset or potential asset has its own inherent immediately. set of rules and possibly even risks. Learning about your assets early in the game will help you leverage them later on. First, she and her advisors must review her 401(k), deferred compensation, You should also have a complete view of your liabilities. While life insurance and stock option plans few investors may regard liabilities as an asset, they can be to fully understand each one’s terms, used as such, particularly in nascent career stages and low-rate provisions and options. Then she environments like our current one. With a “total balance sheet” needs to select beneficiaries for all mindset, you can more readily spot opportunities where a credit four plans. The first two also require strategy offers the most advantageous way to access funds for investment decisions, such as those an investment or expenses. related to asset allocation. In addition, Kate must answer key compensation questions: How would she like to defer her compensation? Over what time period will she be paid after leaving the company? Now is also a good time for Kate to develop or rethink her estate plan. This could involve drafting or updating a will, revocable trust, durable power of attorney or even a health care directive. She might also want to consider holding her life insurance in an irrevocable trust. But perhaps the biggest challenge Kate faces is finding the time to do what must be done.5
  • 6. Create a Long-term, Integrated Plan It is critical to establish a long-term plan that integrates your lifetime needs and your wealth transfer goals, even though the plan will change over time. Be certain to incorporate realistic projections for your income and expenses, taking into consideration your family’s needs, the possibility of inflation, potential health care costs and other future factors. WEIGHING THE TAX CONSEQUENCES In addition, you should include a mid-term component, enabling OF RESTRICTED STOCK your operating plan for the foreseeable future to evolve into your plan for the endgame. For instance, your strategy might include transferring wealth to future generations in a tax-efficient manner while values are low, such as before a private company Kate’s company has granted her goes public (Exhibit 2). Equally important, make sure your plan restricted stock, one-third of which is flexible, so that it can adapt to variable circumstances as your will vest in her name over each of the goals and your career mature. next three years. She has to make an important election within 30 days. Exhibit 2 She can elect to recognize the current value of the stock as income in the year Private to Public Company Transitions the grant is awarded. This will allow WEALTH TRANSFER OPPORTUNITIES IN LOW VALUATION ENVIRONMENTS appreciation of the stock to be treated as a capital gain, taxed at a maximum Outright Gifts rate of 15%. But if the stock declines Irrevocable Trusts in value, Kate will pay income tax on Grantor Retained Annuity Trusts (GRATs) income she won’t receive. Alternately, if she does nothing, the value of the Sales to Intentionally Defective Grantor Trusts stock at the time of vesting will be Valuation Discount Planning considered ordinary income, taxed • Family Limited Partnerships (FLPs) at rates up to 35%. Clearly, Kate’s • Limited Liability Companies (LLCs) decision will have a significant effect on her tax liability and her future. One silver lining in a challenging market environment is the chance to implement wealth transfer plans in a highly tax-advantaged manner. Wealth can be moved to later generations while values are still low, enabling future appreciation with minimal taxes and no, or minimal, gift taxes to the grantor. While appropriate strategies are unique to each situation, the techniques listed above—individually or in combination—warrant consideration, particularly in a low interest rate, low valuation environment.6
  • 7. Established Executives WHEN DETAILS MATTER MOST AS A SENIOR EXECUTIVE IN YOUR MIDDLE EARNING YEARS, you face a new set of wealth management opportunities and challenges. For one, your compensation is more involved, comprising multiple tiers and representing a larger percentage of your wealth. At this point, it’s apt to be a complex combination of salary, bonuses, restricted stock and stock gains from exercised options. It is also common for established executives to discover that hidden investment risks have grown in tandem with their career. For example, you may be holding a concentrated position or you might own discrete investments that would serve you better within a holistic strategy. Concentrated positions, in particular, have a way of covertly establishing themselves, concealing their risks behind a wave of growth. When you consider a mid-career executive’s retirement accounts, options, restricted stock and purchase plans, the degree of exposure to a single stock can be staggering. This is also true of an executive who has held multiple positions in the same field, which can spur a concentration in a single sector or industry. While a concentrated position is clearly one of the biggest creators of wealth, it can also be one of its biggest destroyers (Exhibit 3). Exhibit 3 The Destructive Power of Concentrated Wealth Concentrated equity positions can impact every stage of your executive career, inconspicuously increasing risk in your portfolio. If the equity in which you have a concentrated position experiences a significant decline, the effect on your wealth and financial future can be devastating. Consider just these few recent examples of the risks inherent in holding too much of any one investment. 76.2 30.1 Value of 250,000 Shares (77%) $ MILLIONS 15.6 93% 10.3 10.3 (93%) (92%) (100%) 1.8 0.7 0.8 0* 2007 2008 2009 2010 2011 2012 YEAR General Motors Bank of America Netflix 2012 data as of 1/31/12. Percents represent percent changes in value of 250,000 shares. *Existing equity investors lost any remaining value when General Motors filed for bankruptcy protection in 2009.7
  • 8. Complex tax issues, including liabilities, seen and unseen, are likely to exacerbate your situation. In addition, your goals—and life circumstances—have most likely changed significantly since your career began. Or you may have acted on a series of independent decisions that made sense at the time, but lack the integrated perspective your current situation demands. As a result, your plan may be outdated or insufficient. Even if you’re the extremely rare person whose goals and circumstances remain unaltered, the world continues to change at a faster clip each day. Plans built on yesterday’s assumptions about market return or future expenses (i.e., taxes, health care, general living) are destined to fail. These numerous intricacies surround a single truth: you have less time than ever to think about them. Making the right decisions requires an intense focus on the many moving parts of your financial life, even as the professsional call of duty pulls you in multiple directions. Should you be one of the rare individuals who understands your wealth’s embedded risks and opportunities, your life has probably never been busier. In such cases, inaction may feel inevitable. It doesn’t have to be, however. Addressing these issues is less involved than it may appear to be, and is well worth the attention. A knowledgeable advisor can guide you through the financial maze, using your time wisely as you take these key steps necessary to ensure tomorrow’s security: REFINE GOALS UNDERSTAND WHAT YOU HAVE AND WHAT YOU NEED Keys Steps REFINE PLAN When Details Matter Most PREPARE FOR PHILANTHROPIC AND FAMILY INTENTS DEVELOP AND EXECUTE CONCENTRATED WEALTH STRATEGY CREATE EXECUTIVE COMPENSATION MASTER PLAN Refine Your Goals Begin by verifying that your long-term goals still make sense. Consider your lifetime spending needs, determining the income necessary for your current and future lifestyle. Look at all of tomorrow’s income sources and expenses (Exhibit 4). For instance, assess the costs that your company is assuming now, but won’t cover after retirement. They can be a substantial drain. Take the time also to revisit your family and legacy objectives—and redefine your vision as necessary.8
  • 9. Exhibit 4 Determining True Retirement Income and Expenses: A Checklist CONSIDER DIVERSE ELEMENTS WHEN QUANTIFYING AND FORECASTING INCOME AND EXPENSES ASSESSING THE BALANCE SHEET Income NAVIGATING CONCENTRATED • Investment Portfolio/Trusts WEALTH • Deferred Compensation • Executive Benefits • Pension Plan • Retirement Plan Kate’s 401(k) includes stock in her • Social Security company. She has also been awarded • Other stock options and restricted stock. Thus, as is the case with many mid- Expenses career executives, a large component • Housing and Living Expenses of Kate’s wealth is concentrated in – Mortgage, Taxes, Maintenance one company. She realizes she must • Personal Care and Spending – Insurance, Health Care, Long-Term Care diversify by selling some of her stock, • Expenses/Benefits Previously Covered by Company keeping federal insider trading laws – Travel, Automobiles, Other Interests in mind. After meeting with her – Health Care and Other Insurance Premiums advisor, she learns that she can use • Future Business Investments a Rule 10b5-1 plan to sell the stock and minimize the risk of insider trading issues. If her investment Refine and Consistently Execute Your Wealth Management Plan manager structures and administers Your plan should continually be refined to reflect new realities, the plan correctly, while Kate may including market expectations, regulatory changes, tax laws and not be insulated entirely, she will lifestyle shifts. Be certain also to take a fresh look at the way your have an affirmative defense against life may have changed. Births, deaths, divorces, evolved interests insider trading liability. and other factors should be reflected in your overall plan, as well as in planning instruments and documents. In addition, at this stage of your career, you should have a total portfolio asset allocation strategy. Investments should be coordinated and working together; tax and wealth management strategies should be integrated in a single plan. This is also a good time to develop or reexamine your concentrated wealth strategy (see Strategic Alternatives for Managing Concentrated Wealth, pg. 14) and to make sure your retirement plan is incorporated into your overall game plan.9
  • 10. Exhibit 5 Laying a Strong Foundation COMMON WEALTH AND ESTATE PLANNING COMPONENTS A number of tools and options should be considered as part of every corporate executive’s wealth management plan. If you haven’t already incorporated the resources below into your THE EXECUTIVE TRAVELER: planning, now is a good time to explore the merits of doing so. PLANNING FOR TAXES IN MULTIPLE STATES Will Funded Revocable Trust The growth of Kate’s company takes Durable Power of Attorney her to many different states, with a Health Care Proxy fair amount of travel from her home state to New York and California. She Irrevocable Life Insurance Trust is surprised to learn that her income Charitable Giving must be allocated to all three states • Outright Gift • Charitable Gift Annuity for state income tax purposes. The • Donor Advised Fund • Charitable Remainder Trust allocation is based on the number of • Charitable Lead Trust • Private Foundation business days Kate spent in each state Lifetime Wealth Transfer Vehicles and requires filing tax returns in all • Outright Gift • Sale to Intentionally Defective three. In addition, if Kate’s employer • Grantor Retained Annuity Grantor Trust doesn’t withhold state income taxes (GRAT) • Discount Planning Using for the wages earned in New York and FLP and LLC California, Kate may be required to make estimated state income tax payments to both states. Therefore, Prepare Your Family and Explore the Role of Philanthropy Kate talks with her advisor to avoid Preparing your family for the money is just as important as the state of confusion. preparing the money for your family. Involve family members in relevant wealth decisions at an early age. Address issues such as the need to create a family foundation or trusts with your advisor and your loved ones. By taking the mystery out of money, you equip your family members for their eventual role in preserving and growing wealth. Philanthropy can be a valuable strategic goal that lets you incorporate your personal values into wealth planning while generating a beneficial social impact. By achieving a balance of doing well and doing good, you can ensure a legacy far beyond assets.10
  • 11. Establish an Executive Compensation Master Plan LEVERAGING GIFT PLANNING It is important to fully understand the tax, regulatory and OPPORTUNITIES investment implications of all your income sources, including deferred compensation, restricted stock, retirement plans, stock options and others. Guided by that knowledge, your advisor can create a tax-smart master plan. The plan should employ your As Kate’s career progresses, she compensation strategically, identifying investment opportunities realizes that she needs sophisticated and using timing and taxes to your financial advantage. estate planning. She believes that some of her assets will greatly appreciate Exhibit 6 in the future and would prefer removing their value from her estate. Seeing Tomorrow Clearly She would like to use those assets to UNDERSTANDING YOUR ACTUAL INCOME render lifetime gifts—without incurring a gift tax liability. Too often, investors underestimate the impact of inflation, health care costs and other influences when calculating future income. Her advisor presents two options: She They focus on the top line—their projected asset growth—without can donate the assets to a charity with fully considering the affect of various asset drains over time. no gift tax. Or she can pay little or no gift tax by placing the assets in an At every stage of your executive career, it is important to map out irrevocable Grantor Retained Annuity your projected actual income and expenses and recalibrate future Trust (GRAT). As with many elements plans accordingly. Keep in mind how­ and when—taxes, wealth — of wealth planning, Kate’s decisions transfer plans and other future costs could draw on assets, as well cannot be made in isolation. They as the timing of inflows such as deferred compensation. In this must be weighed carefully against way, you can build your future plans based on a realistic picture other influences. For instance, a GRAT of what’s ahead. is ideal when interest rates are low and market values are depressed— 100 $ MILLIONS Generating Assets Drawing on Assets as they are in the current climate. 80 Kate decides to make a gift to a GRAT, 60 Retirement retaining her interest in the GRAT for several years, after which the 40 remaining assets will be transferred 20 to a beneficiary. If the performance of the GRAT investments exceeds a 0 2012 2024 2034 2044 2050 pre-established rate, Kate will receive YEAR the excess funds at the termination Without Any Taxes After All Taxes After All Taxes and Living Expenses After All Taxes, Living and of her “ownership” period, free of any Health Care Expenses gift tax. Portfolio Growth under 2012 Tax Policy Asset allocation based on a 50/50 portfolio, diversified across asset classes. Annual living expenses in retirement are 5% of the portfolio value, increased at an assumed inflation rate of 2.5% per annum. Annual health care costs in retirement are $20,000 annually, increased at an assumed inflation rate of 6% per annum. Source: BNY Mellon Wealth Management. Please see endnote 1 for additional information.11
  • 12. Transitioning Executives PERFECTING THE PLAN FOR WHAT’S NEXT AS YOU MOVE CLOSER TO RETIREMENT, it’s important to define exactly what “retirement” means to you. Is it an opportunity to start a second career? To pursue the interests you had little time for while working? To strengthen your commitment to charitable causes? Regardless of the life you envision, planning for retirement in your later leadership years can have an enormous impact on the quality of your life after work. Your compensation is certain to be more extensive—and more convoluted—than ever before. It is imperative to have a strategy for replacing it and for executing transactions such as cashing out executive benefits in a tax-efficient manner. In an ideal world, your plan would be in place before this phase even begins. In many case, it isn’t, but valuable steps still can be taken. In addition, although you are well into your career, it is not unusual for concentrated positions to have gone unnoticed or unmanaged. Nor is it uncommon for hidden and complicated tax issues to emerge. Even your wealth transfer and family governance directives may be only half-formed. Therefore, your wealth management plan should incorporate two strategies: one for your transition period and one for your retirement. You need to ensure that every possible opportunity is exploited as you move from work to after-work, and that the life you envision is the one you actually lead. Here are important steps that can help: CONFIRM AND ADJUST TO YOUR GOALS EXECUTE PLAN Keys to a Successful IMPLEMENT CONCENTRATED WEALTH STRATEGY Transition Into EXECUTE EXECUTIVE COMPENSATION MASTER PLAN Retirement IMPLEMENT WEALTH PROTECTION AND TRANSFER STRATEGIES CREATE RETIREMENT LIQUIDATION PLAN12
  • 13. ACROSS STATE LINES: STRUCTURING RETIREMENT PAYOUTS Confirm and Adjust Goals to Reflect Late-Stage Realities TO MINIMIZE TAX EXPOSURE Confirm your long-term objectives and make whatever adjustments are necessary to reflect new expenses, increased spending and changes in cash flow expectations. Be certain also to update After a successful career, Kate is your family and legacy goals. This reassessment may involve considering retirement. Her 401(k) recalibrating your income plan based on lower return expectations and deferred compensation plans are or a soft economy. The ultimate intent? To ensure that market substantial and her investment portfolio realities don’t undo everything you’ve worked to create. is large. In addition, she will receive a monthly retirement benefit from Also take into account the impact of your future personal plans on her company’s defined contribution your strategy. For example, domicile decisions have far reaching plan. She needs to ensure that the tax consequences on income and estate taxes—i.e., if you own consequences of her distributions are houses in multiple states or are intending to move, your estate minimized. plan may need to be revised to take state laws into account. Kate lives in a state with a high income Refine and Continue to Execute Your Wealth Management Plan tax rate, but is planning to move to Florida, which has no income tax. As in the mid-stage of executive growth, a total portfolio asset She is concerned that her distributions allocation strategy remains important as you near retirement. will be subject to the tax laws of her Investments and their strategies must be coordinated, and plans current state, even though she will be must consider both sides of the balance sheet. Additionally, you living elsewhere. Her advisors inform should continue implementing your concentrated wealth strategy her that a federal law enacted during and your executive compensation master plan. the Clinton administration prevents her pension and 401(k) benefits from Solidify Your Wealth Protection and Transfer Strategies being taxed once she becomes a Florida resident. This is not true of Secure your legacy by updating and skillfully implementing wealth her deferred compensation plan. protection and transfer strategies. Continue to leverage the role of philanthropy and solidify family governance plans to make sure Kate’s deferred compensation your heirs are ready to manage assets when the time arrives. distributions are subject to taxation in her home state unless she elected Create a Retirement Distribution Plan years ago to take her distributions over an extended period of time. Fortunately, This is your final opportunity to maximize the value of your her advisors recommended that retirement benefits while minimizing tax liabilities. That strategy from the start. Her deferred means making sure strategies are in place for managing plan compensation payouts were structured distributions and compensation cash-outs, including determining to avoid the future threat of her home the right timing for each. At what point should you cash in your state’s high taxes. 401(k)? What’s the best time to exercise your options? How Unfortunately, some of Kate’s colleagues will gifting impact liquidations? How could state-specific issues were not as lucky. Upon retiring to influence your pension distribution decisions? Consider all tax, Florida, they discovered that the investment and regulatory implications to ensure that your deferred compensation decisions they liquidation decisions are optimal and that they fully address your made early in their career now subject lifetime cash flow and income needs. them to the taxes of a state in which they no longer reside.13
  • 14. COORDINATING DISBURSEMENTS TO MEET CASH FLOW NEEDS TAX EFFECTIVELY Kate, who is 62, is reviewing her Strategic Alternatives for Managing Concentrated Wealth retirement cash flow. Some factors Moving away from a concentrated position presents a two-fold are beyond her control: the timing of challenge: You must diversify your portfolio while managing her monthly pension benefit, the start its significant embedded tax costs. What’s more, these two date of her deferred compensation components must be balanced in the context of your particular (the day she stops working), and circumstances and goals. her deferred compensation payout, which will be spread over 10 years. In addressing this challenge, the first step is to fully quantify its scope. Your advisor should analyze all your compensation and After careful analysis, Kate decides investments to clearly identify your concentrated position(s). Then to meet her cash flow needs over a unified plan should be created that may involve a number of the next 20 years with her monthly strategies: pension benefit and, over the first 10 years, with her deferred compensation 1. Sell and diversify—This approach is usually implemented distribution as well. By the time her with an outright sale or a Rule 10b5-1 plan. The goal is to liquidate 10-year deferred compensation ends, your concentrated position and redeploy your assets in a broadly Kate’s 401(k) distribution will have diversified portfolio, while taking advantage of current favorable begun, as it is required to start the year Federal long-term capital gains rates. after she turns 70½. In addition, she will be able to take distributions from 2. Gifting—Philanthropy affords significant benefits in terms her investment portfolio as needed. of deferral and avoidance of Federal capital gains taxes. It also provides your family with the opportunity to pass on its values to By incorporating her retirement future generations by building a legacy of sharing. Grantor Retained accounts’ restrictions and allowances Annuity Trusts and Family Limited Partnerships can into her planning, Kate is able to also be effective. meet her cash flow needs and live comfortably and securely in retirement. 3. Hold a position and diversify through borrowing or derivatives— If circumstances preclude a stock sale or transfer, your advisor might recommend strategies such as borrowing, exchange funds or derivatives (i.e., prepaid variable forward sales contracts, cashless collar, etc.). This allows you to retain some or all of the concentrated security while generating liquidity to diversify your portfolio or meet other financial needs.14
  • 15. Choosing a Team with Good Business Sense CREATING AND EXECUTING A PLAN BASED ON YOUR CAREER STAGE IS CRITICAL, even if your circumstances do not fit neatly into one of the categories presented here. However, ongoing management and expertise are equally instrumental in pursuing your long-term goals, keeping you on track as your needs evolve. It is critical to work with an advisor who has a deep understanding of wealth management, as well as proven experience with corporate executives and their convoluted compensation. The right mindset is also important. Your advisor should remain active, engaged and accountable—and should care about your goals. He or she should also value the input of other experts who may be integral to your success, such as accountants and attorneys. Finding the team that’s right for you is a highly personal undertaking and may require a bit of due diligence. But it is well worth the undertaking. BNY Mellon: Experienced Wealth Management, Executive Focus BNY Mellon is a global financial leader with extensive experience serving the needs of corporate executives (Exhibit 8). No matter where you are in your career, BNY Mellon Wealth Management can provide assistance in four key areas: Keys to LONG-TERM PLANNING Meeting The EXECUTIVE WEALTH ANALYSIS AND PLANNING Needs of PLAN EXECUTION Corporate Executives ACTIVE MANAGEMENT15
  • 16. Long-Term Planning We partner with you to develop a dynamic integrated plan based on a clear vision of your future. This includes an analysis of your personal, family and financial goals, plus a full balance sheet review (assets and liabilities). Equally key, your plan is structured to continually adapt to business, life and market changes. Executive Wealth Analysis and Planning We manage all issues related to executive wealth, simplifying complexity and minimizing the obstacles that prevent so many executives from planning. By addressing important ideas and decisions when they should be addressed, we lighten your burden and lay a solid groundwork for growth. Plan Execution We maintain a holistic view of your plan while paying detailed attention to its many complex, moving parts—investment strategy; stock sales; tax, estate, cash flow and income planning; retirement distributions, etc. As a result, you make decisions that are strategic and take action at the most opportune moments. Active Management Your plan is continually and actively monitored, managed and adjusted. Guided by our highly disciplined approach, we never lose sight of your long-term goals or the important daily details and decisions. By applying our best-in-class resources and unrivaled expertise on an ongoing basis, we not only shape your success, but also help ensure it. As a BNY Mellon client, you work with a dedicated portfolio manger who is supported by a team of experts in all areas of wealth, including executive compensation strategists. This client-focused approach ensures that you receive whatever world-class guidance and resources you need, whenever you need them. BNY Mellon—Relevant Leadership Strengths for Our Executive Clients • Clients include 89% of the Fortune 500 • 225+ years of financial strength and stability • Among the nation’s leading wealth managers 1 • Among the world’s largest asset managers 2 • Industry-leading wealth management client satisfaction and retention rates • Deep expertise in investment management, wealth and estate planning, and private banking 1 Barron’s, September 19, 2011 2 Pensions and Investments, October 31, 201116
  • 17. Exhibit 8 BNY Mellon Wealth Management EXECUTIVE WEALTH SERVICES Long-Term Planning Analysis of Personal, Financial and Family Goals Full Balance Sheet Evaluation Dynamic and Integrated Long-Term Plan Development Executive Wealth Plan Execution Analysis and Planning Compensation Evaluation Concentrated Position Management • Stock option planning and modeling • 10b5-1 plan coordination • Restricted stock planning • Concentrated equity solutions • Non-qualified, SERP, IRA and other • Equity derivatives retirement plan analysis • Directed trading • Insider executive issues management • Dedicated trading platform • Compensation master plan development Executive Stock Sales and Implementation Liquidity and Liability Analysis • Specialized lending arrangements • Retirement cash flow projections • Facilitation of stock option exercises • Credit planning • Stock purchase and restricted stock sales • Specialty financing analysis and solutions and management Wealth and Estate Planning Proceeds Management • Wealth protection and transfer • Tax-conscious planning and execution • Legacy and family governance • Ongoing harvesting of gains and losses • Philanthropy and administration • Retirement plan disbursement strategy • Insurance evaluation and coordination • Custody and safekeeping Concentrated Position Strategies • Self-directed investing • Concentrated holdings analysis Liquidity Management • Diversification strategy analysis • Customized lending Tax Strategies and Coordination • Charitable plan implementation • Full trust powers Active Management Team Service Approach Disciplined Process for Managing Strategies Best-in-Class Resources17
  • 18. Plan with an Experienced Advisor IT IS NOT UNUSUAL FOR A CORPORATE EXECUTIVE to grow his or her wealth, yet lack an overall wealth management plan. Even those who put a plan in place sometimes make the mistake of letting it stay there. Instead, your plan should adapt to market dynamics, new opportunities, regulatory shifts and the transitions of your own life. In short, you need to plan and keep planning. We stand ready to help. Endnote 1 Exhibit 6, Seeing Tomorrow Clearly The husband and wife are each 52 years old in 2012. While working (through 2019), they contribute $125,000 annually to their initial $5 million portfolio established in 2010. They plan to retire at age 60 (in 2020). The couple’s blended 50/50 portfolio comprises 27% U.S. large cap equity, 5.3% U.S. mid cap equity, 3.2% U.S. small cap equity, 6.5% developed international equity, 7.5% emerging markets equity, 41.6% tax-exempt fixed income, 2% high yield fixed income, 2% emerging markets debt, 1% commodities and 3.9% managed futures. The illustration in exhibit 15 is based on a linear growth projection based on annual return assumptions of approximately 6.3% pre tax and 5.5% after tax. 2012 tax policy assumes 35% federal income tax, 15% long-term capital gains tax, 15% dividends tax and 5.3% state income tax. The information provided is for illustrative/educational purposes only. All investment strategies referenced in this material come with investment risks, including loss of value and/or loss of anticipated income. Past performance does not guarantee future results. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation. Pursuant to IRS Circular 230, we inform you that any tax information contained in this communication is not intended as tax advice and is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. ©2012 The Bank of New York Mellon Corporation. All rights reserved.18