Pressing issues Featured

7:00pm EDT February 28, 2007

As a successful executive, you may 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 a corporate career.

Smart Business talked with Stephen Pappaterra, senior vice president and managing director of PNC Wealth Management, to learn how personal financial success depends on much more than the mechanics of the investment process.

What is a comprehensive wealth management plan?

Wealth management is no longer just about hiring someone to manage your investments. It’s about taking the time to really understand your life’s goals, both business and personal, because the two are so closely intertwined. This approach asks executives to think about what they want to do with their life, rather than what they want to do with their money. It’s about dream-making. And to help make these dreams a reality, a comprehensive wealth management plan will help an executive manage current and future cash flow, plan for career changes and/or retirement, maximize their investments, minimize taxation and leave a legacy that reflects their personality and values.

What are some of the most pressing wealth management issues facing executives today?

Holding a highly concentrated equity position is a common problem among many senior-level executives. It potentially exposes their net worth to unnecessary risk, so it is extremely important to develop a strategy to diversify your portfolio to make sure your family’s wealth is not severely and adversely affected by a downturn in the company’s stock.

Another concern is how to turn paper wealth into real money. There are a number of strategic ways to gain liquidity while managing your risk and tax liabilities, including securities-based loans and charitable remainder trusts. A financial advisor can also develop a systematic selling strategy — liquidating shares periodically in an orderly manner — to help you maximize the proceeds of your sale.

Equally important is how you decide to pass on your wealth. A formal estate plan will not only help to pass on your legacy to your family and future generations, it can also help to minimize taxation. According to a PNC survey conducted in 2004, just 31 percent of individuals with $1 million to $10 million in investable assets have a professionally written estate plan. And an unplanned, moderately large estate can result in 45 percent or more in federal and state death taxes.

Will you be able to reach your retirement goals?

People in their peak earning years (aged 46 to 64 years) are more than twice as likely (42 percent) to be concerned about meeting their retirement goals than those younger (16 percent) or older (13 percent), according to a PNC survey conducted in 2004.

These statistics are not surprising when you look at changes occurring in the work-place. In the last decade, executives have had to take a more active role in managing their financial assets. Many companies have moved away from defined-benefit pension plans and consequently more individuals are now responsible for making decisions about how to invest their own money. Deciding how to invest can become even more complicated when an executive leaves a company and receives a lump sum distribution. It may come as a surprise to learn that an executive could save on taxes by not rolling this money into an IRA.

Executives also need to plan for life changes. For many executives, retirement no longer marks the end of a career. Instead, individuals are starting to think in terms of how they want to spend the next phase of their lives. This planning involves looking not just at future cash flow, but also considering issues such as life insurance and health care costs.

Are there advantages to seeking professional advice?

Today, financial success is no longer measured by comparing investment performance against financial indices. Instead, it involves navigating an increasingly complex investment landscape to help you safeguard your assets, enjoy your post-retirement years and leave a lasting legacy. It takes careful planning, continuous monitoring of your financial situation and adjusting your plan as new events occur in your life.

Having access to a team of experts can certainly help an executive develop sophisticated and creative solutions to managing wealth. But it is extremely important to work with an advisor who will take the time to really understand your personal and professional goals and is committed to providing objective advice to help you achieve financial success.

This article was prepared for general information purposes only and is not intended as specific advice or recommendations. Any reliance upon this information is solely and exclusively at your own risk.

STEPHEN PAPPATERRA is senior vice president and managing director for PNC Wealth Management based in the Philadelphia office. Reach him at or (215) 585-6551.