Personal Finance
Personal Finance

When it Takes More Than Simply Investing.
As a successful executive, you likely spend most of your time thinking about your company's bottom line. But how much attention do you give to your own financial situation, especially as your circumstances become more complicated? Often, taking care of your personal financial affairs can be even more complex than handling the heavy demands of your corporate career.

That's why so many executives turn to the professionals at PNC for comprehensive wealth management services. services. Your personal financial success depends on much more than the mechanics of the investment process. It takes careful planning, continuous monitoring of your financial situation and adjusting your plan as new events occur in your personal life and professionally.

Challenge #1: Turning Paper Wealth into Real Money

Challenge #2: Managing Risk

Challenge #3: Passing it On

 

 

Professional Challenge # 1:              Turning Paper Wealth into Real Money
Is now the right time to exercise my stock options?

Professional Wealth Management



Joanne, 50, is a senior vice president with a global telecommunications company where she has accumulated stock options of 100,000 shares and 50,000 shares of restricted stock in her company. She and her husband want to buy a second home, and are thinking about exercising a significant portion of her options to finance the down payment.

However, they are concerned about squandering the opportunity that those options represent, and about the tax liability that they will incur. They decided it was wise to talk with an advisor at PNC Wealth Management.

  • The first thing Joanne's advisor did was thoroughly review her financial goals with her attorney and tax advisor to determine how the options fit into the Conners' overall plan.
  • Next, PNC investigated the option grants themselves, including the strike price, the maturity, and whether or not the shares underlying the option grants would be restricted.
  • PNC also assessed the financial impact of exercising her options.

After conducting a cash flow analysis, PNC recommended that the Conners consider a cashless exercise of stock options. Essentially, the Conners would borrow the money needed for the option exercise, rather than pay cash. They agreed, and used the proceeds from the cashless exercise to buy the home of their dreams.

 

Considering an Outright Sale of Your Stock? There are many ways to achieve liquidity from the equity you own in your company. Remember, an outright sale of a large block of company stock usually is impractical for most senior executives given the legal hurdles, tax implications and potential negative publicity for your company. There often are wiser and more strategic ways to gain liquidity while managing your risk and tax liabilities, including securities-based loans and charitable remainder trusts. If your securities are marketable, PNC Wealth Management can help develop a systematic selling strategy?liquidating shares periodically in an orderly manner - to help you maximize the proceeds of your sale and potentially avoid negative publicity for your company. Your PNC Wealth Management team can advise you which strategy may be appropriate for your unique situation.1

1. PNC Wealth Management does not provide legal, tax or accounting advice.

Professional Challenge # 2:              Managing Risk
Am I at risk of losing it all?

Professional Wealth Management



Bruce, 58, is the chief executive officer of a publicly traded software engineering firm. The majority of his compensation comes in the form of company equity from various stock option and bonus plans. Therefore, his personal net worth - and current source of income - is heavily dependent on the fortunes of a single business. After experiencing a significant financial loss when the dot-com bubble burst, he has managed to steer the company back on track over the last few years.

But what if another crisis should befall the company?

Bruce fears that his and his family's financial situation would be severely and adversely affected by another major loss in value of the company. He decided to speak with PNC Wealth Management about hedging his risk.

Holding a highly concentrated equity position is a common problem among many senior-level executives. It potentially exposes their net worth to unnecessary risk. Bruce's advisor suggested an equity collar that created a "floor" under the price of his company stock, along with an agreed upon "ceiling" price.

This hedging strategy provided Bruce downside protection in return for relinquishing a portion of his upside potential. In addition, the strategy allows Bruce to use the collared securities as loan collateral, if so desired. The strategy can provide Bruce and his family the peace of mind they desire.

 

Professional Challenge # 3:              Passing it On
I've worked too hard to have the majority of my money go to taxes.

Professional Wealth Management



David McGuinness, 62, the chief operating officer of a large pharmaceutical company, is planning to retire at the end of the year.

He wants to provide for his four children and several local charities, while minimizing the share of his wealth that will go to the government in taxes. However, without a formal estate plan, David feels vulnerable to unnecessary taxes and is worried that his money will not be allocated as he wishes.

He spoke with a professional estate planner at PNC Wealth Management. Working with David's legal counsel and tax advisor, PNC suggested some creative ways for him to potentially protect his estate from unwanted outcomes and unnecessary taxes.

  • David's PNC advisor suggested a Dynasty Trust to help him build a foundation of family wealth for generations to come. With a Dynasty Trust, his assets may be protected from creditors, estate taxes and wasteful spending for as long as he wishes.
  • A formal estate plan also was established for David, which reflected his current financial situation and intentions.

With proper planning from PNC Wealth Management, David's worries were alleviated.