Coach’s Corner

When a client is holding onto concentrated wealth and tells you, "I have my reasons," those reasons are often emotional rather than rational. If you are to successfully counsel a client toward diversification, you must empathize with their emotional or sentimental attachment to the stock in question.

Let's consider wealth inheritors with concentrated positions. Inherited wealth via a concentrated stock position often comes with sentimental attachment or perceived familial pressure to hold onto the stock. For charitably-inclined clients in this situation, planned giving strategies can be a great way to reconcile their sentimental attachment with their financial needs.

Before exploring the different planned giving vehicles, remember the CAR framework for driving concentration conversations forward:

• Celebrate. Celebrate their success, as it may very well be the reason for their wealth.
• Ask. Ask clients an inviting question such as, "Are you open to discussing how the holding fits into your overall financial plan?"
• Remind. Remind them that not all shares of stock are created equally, especially from a tax perspective.

Here is an example of how a concentration conversation with a wealth inheritor may unfold using the CAR framework:

Advisor: "It must be very rewarding for your family to see how well this stock has performed. Are you open to discussing how this holding fits into your overall financial plan?"

Client: "Sure."

Advisor: "Great. First, can you tell me what your hesitations may be for diversifying this concentrated position?"

Client: "My father was instrumental in building the company. Selling it now would feel like betraying his memory."

Advisor: "Your father built an impressive business so I can understand your hesitation. My worry is that keeping this concentrated position may put your financial goals in jeopardy, and subject you to significant tax implications since not all shares of stock are created equally. Have you considered honoring his legacy by making a charitable donation to a cause that was particularly important to him?"

Client: "No, I never considered that."

Advisor: "One small step we can take today is exploring how planned giving vehicles can help you honor your father's legacy in a meaningful way while helping you achieve your financial goals."

Client: "I'd be interested to hear more about that. Please continue."

Bottom Line: When it comes to concentration conversations with charitably-inclined clients, consider how planned giving strategies can help reconcile their sentimental attachment to the stock with their financial needs.