Strategies for concentrated wealth
Low cost basis concentrated stock positions may leave clients significantly under-diversified, in addition to facing an outsized tax liability when realizing the gains on their holdings. Our portfolio team works closely with investment professionals to identify what they believe is the best strategy for unwinding concentrated stock. There are three ways to approach the transition process:
- Immediate diversification – To help reduce risk, we can sell the position down to its target weight at once. This approach is generally most effective when the client has already booked losses that can be harvested to help offset gains.
- Balancing diversification with taxes – We can sell the position off gradually to help balance these competing goals. Setting a finite time for completing the transition, our portfolio team can spread the tax burden over several years.
- No net taxes – If tax management is the highest priority, and the client is comfortable with the risks of an under-diversifed portfolio, we can time the process so that all reductions in the positions are offset by any losses the client may have. This requires significant cash funding or selling a portion of the position but can be an effective solution to help minimize taxes.
Find out about our transition strategies and our customized index solutions.