Why Corporate Executives Need Specialized Financial Planning

As financial planning evolves from a practice into a science, there is growing recognition that its main subject matter – people – is a collection of few constants and many variables. Financial planning for lawyers or doctors differs from corporate executives to account for the many variables associated with each occupation.

Corporate executives represent a highly differentiated group, with distinct characteristics, needs and goals, making them ideal for a specialized approach. They also represent one of the largest segments of high-net-worth individuals. In a study conducted by Fidelity Investments, The Fidelity Millionaire Outlook Series, corporate executives accounted for 18% of all millionaire households, more than any other category.

Why corporate executives are different

In our recently published book, Personal Financial Planning for Executives and Entrepreneurs: the Path to Financial Peace of Mind, we noted several key characteristics of corporate executives, all of which are integral to the financial-planning process. While the following may not apply to all executives, there are eight key commonalities within this group:

  1. They are leaders who establish and hold themselves to higher goals.
  2. They are well paid.
  3. They tend to operate under formal employment contracts or arrangements.
  4. Their compensation is usually tied in large part to performance goals.
  5. They are likely to have meaningful equity interests in their employers.
  6. Their financial fortunes are disproportionately tied to those of their employers.
  7. They often are entitled to participate in complex benefit plans.
  8. They may be exposed to unique legal and other risks related to their positions.

Financial planning for these individuals must address not only the basic elements of planning applicable to all individuals, such as the need to have a will, but also those key distinctions.