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CEOWORLD magazine - Latest - Banking and Finance - Three Strategies Executives Should Pursue to Protect Their Personal Wealth

Banking and Finance

Three Strategies Executives Should Pursue to Protect Their Personal Wealth

Puai Wichman

It’s the common question posed to executives, the question that experienced leaders always have a well-rehearsed answer for. Officers and directors bear immense responsibilities as they protect the interests of thousands of corporate stakeholders, so it’s natural to assume some anxiety comes with the job. But, when asked about their worries, leaders must pair concern with confidence, simultaneously acknowledging and discharging any potential vulnerabilities.

What keeps you up at night?

Yet, while losing sleep – figuratively or literally – to secure their company’s prospects, executives often let their personal assets remain vulnerable. Stability fosters effective leadership, and personal financial woes should never get in the way of the disciplined decision-making required of senior-level posts. As such, when considering the order of priorities that they must juggle, corporate leaders are wise to recognize that securing their personal wealth should be placed near the top.

In this article, we will discuss three key strategies that executives can pursue to protect their wealth and perhaps sleep a little better. Here are a few to consider.

  1. Protect assets from litigation – stay ahead of the pack with offshore trusts
    Given their responsibilities for disclosing and certifying financial results, their access to non-public information, and the litigious environment in which corporations operate, executives face heightened legal risks. Shareholders and employees increasingly leverage litigation to pursue their interests, often putting executives in the crosshairs.To protect personal assets from potential litigation, executives should start by inventorying assets according to ownership type. Any significant property held in individual or joint ownership is likely a ripe target for plaintiffs seeking easy settlements. Transferring ownership to a trust is a well-tested and known technique to safeguard assets. Offshore trusts, however, offer a whole new level of protection by way of enhanced privacy and, if you pick the right jurisdiction, a rugged reputation to protect an individual’s interests against all adversaries. As an example, the mere mention of a Cook Islands Trust often brings an end to any potential lawsuits and encourages an early settlement. Certain jurisdictions, such as the Cook Islands, have well-established legal frameworks that protect assets better than laws in many States.
  2. Manage investments for growth, protection and tax efficiency
    Executives face more complex tax issues due to complex compensation structures that often include stock options, salary deferrals, and bonuses. Yet, not enough emphasis is placed on tax efficiency, and executives often pay a larger tax bill than necessary. A lack of comprehensive tax strategies can drag on investment results, eroding personal wealth.A highly compensated employee should engage in an investment strategy that prioritizes not just growth but protective measures that include a tax efficient strategy.  This is where highly experienced tax advisors are necessary as part of any well-structured plan.  For example, maximizing tax-deferred investment vehicles is a good place to start. Once tax-sheltered accounts have been maxed out, and wealth begins to accumulate in taxable brokerage accounts, it may be appropriate to allocate some fixed income holdings to tax-advantaged investments such as municipal bonds. This would also be the time to begin engaging in tax loss harvesting strategies and utilizing highly appreciated assets for charitable giving. While these methods each have a modest impact on their own, a comprehensive tax plan can add meaningful performance to investment accounts over time.

    Offshore trusts with experienced tax advisors and investment managers can aid in creating a tax-efficient portfolio. Working with reputable trust companies and experienced tax attorneys can help ensure that you are protecting your assets from unnecessary taxes.

  3. Diversify assets to reduce concentration risk
    While diversification is essential for every investor, executives face specific concentration risks, as they often hold an outsized position in company stock (or options) and rely on the performance of their company and the industry to maximize earnings. Unfortunately, every industry goes through ups and downs, and the downs are magnified for executives who don’t hedge their exposures properly.Better exposure to broad cap-weighted indexes may not provide the intended diversification, and may even exasperate concentration risk, depending on specific stock exposure and industry risks. Executives should understand how much exposure they have to their company’s sector through their active and passive investments and how far those exposures are overweighted due to stock options and future performance bonuses. Direct indexing through separately managed accounts is gaining popularity as an option to customize sector and industry concentrations relative to a broad index, as direct indexing products can allow investors to eliminate exposure to an industry or sector. These offerings have the additional benefit of incorporating environmental, social, and governance preferences.

    Offshore investment managers may also be able to achieve similar diversification objectives, while providing additional benefits, such as jurisdiction diversification (which reduces any legal exposure specific to one jurisdiction) and currency diversification (which mitigates the impact of fluctuating currency valuations on global investment portfolios).

The financially secure executive is better poised for effective decision-making, and this blueprint can create a formidable shield to protect wealth. As executives acquire assets, they should consider using these strategies to create a stable foundation. There are plenty of risks today that may keep corporate leaders up at night, but their personal wealth need not be one of them. 

Written by Puai Wichman.
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Puai Wichman
Puai Wichman serves as the CEO and Founder of Ora Partners – an international trustee and wealth solutions firm. In this role, he plays an integral part leading the firm’s services and serves as a trusted resource for high-net worth individuals and their families to implement estate and wealth preservation plans.

Wichman has 30 years of experience in the asset protection business and a deep understanding of the offshore financial services sector of the Cook Islands. With access to some of the best performing financial planners in the world, he offers his clients the means to safely navigate today’s volatile economic and geo-political world. Wichman works closely with a global network of top professionals across law, investment, tax, and emerging technologies to help families find strategic investments and a secure place to conduct business.

In addition to his deep knowledge of wealth preservation, Wichman is a qualified lawyer admitted in both the Cook Islands and New Zealand. Outside of the office, he remains devoted to professional organizations including the Cook Islands Law Society. Wichman earned a Bachelor of Laws (LLB) at the University of Auckland.

Puai Wichman is an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn.