Sophisticated Strategies for Today’s Executive Investor
By Matt Held, CFP®
Many executive investors run into trouble with concentrated risk in lopsided portfolios. In a previous article, we discussed how the complexities of executive investors’ opportunities made mere portfolio rebalancing only part of a solid investment strategy. These investors also need slightly more advanced strategies for retaining gains, mitigating volatility, and managing taxes.
In this post, we take a look at a few of these more sophisticated strategies for executive investors and how they can reduce the risks of overconcentration.
Collars: Hedging Without Stalling
Executive investors are sometimes restricted or discouraged from selling company stock because of concerns about insider trading or tax planning. One way they can navigate those restrictions is by using collars to preserve their position without triggering a taxable event.
The collar strategy involves buying a protective put option, setting a minimum sale price for the stock. At the same time, the trader sells a call option to generate earnings. The income from selling the call usually offsets the price of the put, so the collar is executed at a very low cost, if any at all.
A protective put is a strategy where you buy a put option for the stock you already own. This put option gives you the right (but not the obligation) to sell your stock at a specific strike price before the option expires. Think of it as insurance, providing downside protection for your stock for a cost.
If the stock price declines, the value of the put option increases, compensating for the losses beyond the strike price. While this offers a safety net by limiting potential downside, it also comes with a cost: the premium paid for the put option. If the stock price remains stable or rises, the premium is a non-refundable expense, but the investor gains peace of mind from the protection.
Collars are often built to remain for extended periods—months or years—so they can be unwound when it’s more tax-efficient or you want to diversify your assets without incurring excessive capital gains.
Exchange Funds: Instant Diversification Without Liquidation
Exchange funds (not to be confused with exchange-traded funds) are tools for executive investors to diversify their holdings without selling taxable shares. The investor contributes their concentrated stock positions to a common fund to which others contribute their stocks, giving the investor ownership in the fund proportional to their contribution. This allows the investor to “exchange” a certain amount of stock they may own in a single company for ownership of a shared pool of stock that is more diversified.
Investors can only participate in these private exchange funds by contributing stock. Stocks within the pool may vary, depending on what has been contributed by others with ownership in the fund. However, exchange funds are often tied to specific market indices in an attempt to match performance, like the Nasdaq-100 or S&P 500.
These funds are strictly reserved for high-net-worth or accredited investors. Exchange funds usually come with a locked-in, multi-year commitment. Regardless, executive investors are drawn to them for their substantial tax advantages and instant diversification.
Exchange funds are also low maintenance since they’re professionally managed (as many investment funds are). When investors finally exit the fund, generally after a seven-year holding period, they come out with a more balanced mix of assets.
Charitable Remainder Trusts: Earning Income While Giving Strategically
Charitable remainder trusts (CRTs) are solid vehicles for philanthropically minded investors who want to limit concentration risk in a tax-efficient way. With a CRT, the investor donates highly appreciated stock to a trust in exchange for an income stream that is set for a certain number of years, or possibly the rest of their life.
At the end of the term, the trust gives the rest of the money to a specific charity. There are many benefits to this deal: the charity gets help, the investor doesn’t have to pay capital gains tax on the stock, and the investor gets a steady income for a set amount of time.
CRTs do require professional legal setups and must be continuously administered. But the tax efficiency and income generation make championing a cause attractive to executive investors.
Donor-Advised Funds: Giving Simplified
Donor-advised funds (DAFs) give executive investors more flexibility when it comes to charitable donations. This tool also involves donating appreciated stock to a fund. Investors then get an immediate tax deduction that steers clear of capital gains taxes. The funds can then be progressively released to charities over time at the donor’s request.
DAFs are especially beneficial to investors in their high-income years. They could also be advantageous in the course of a major liquidation event, like large share sell-offs or exercising options. Although DAFs don’t provide the income streams that CRTs offer, they’re easier to manage and provide tangible tax benefits.
Strategic Planning for Executive Investors
These strategies give executive investors access to high-level financial instruments designed to preserve wealth while spreading risk across their assets. While they may come with tradeoffs, they offer flexible safeguards from overconcentration and tax liabilities.
Clarity Wealth Management works with executive investors to maximize their financial position through innovative strategies. Executive clients contact us to find out how they can execute these sophisticated strategies on a wide scale. Interested in a no-obligation, icebreaker call? Schedule online here, call (513) 278-9420, or email Info@ClarityWealth.org.
*The strategy does not guarantee against loss and may not meet an investor’s objectives. Participating in options involves risk and is not necessarily appropriate for all investors. The strategy does not guarantee against loss and may not meet an investor’s objectives. Options are not suitable for all investors. Typically, commissions are charged for options transactions. Transaction costs may be significant in multi-leg option strategies including collars, as they involve multiple commission charges. Please contact your financial advisor for a copy of the Options Disclosure Document (ODD).
About Matt
Matt Held, CFP®, is the lead advisor and a founding partner of Clarity Wealth Management, a boutique firm based in Cincinnati, OH. Since entering the industry in 2006, Matt has helped corporate executives, professionals, and business owners uncover opportunities and build long-term financial strategies. Driven by a desire to control his own future and create a lasting brand, Matt co-founded Clarity Wealth Management in 2012. His mission was to build a firm that would provide truly personalized guidance—and become a legacy for his own family. Today, Clarity serves about 100 households and focuses on helping clients simplify and navigate complex financial decisions, particularly those involving equity compensation, tax planning, and executive retirement.
Matt’s approach is rooted in trust, loyalty, and hard work. As a CERTIFIED FINANCIAL PLANNER® professional, he is deeply committed to long-term relationships and believes that clarity doesn’t mean predicting the future, but having the confidence that your plan can handle whatever comes your way.
Outside of work, Matt enjoys time with his wife, Abby, and their twins, Henry and Kinsley. Whether it’s watching sports (they love their Ohio State Buckeyes), hitting the slopes out West, or squeezing in a workout, he’s passionate about staying active and present. He’s also a proud graduate of Moeller High School and The Ohio State University. Matt holds Series 7 and 66 licenses, is licensed for health insurance, and earned his CFP® certification in 2012. He has been named a Five Star Wealth Manager in the Cincinnati area since 2013.* To learn more about Matt, connect with him on LinkedIn.
*2013-2018 and 2020-2024 Five Star Wealth Manager Award, created by Five Star Professional. The 2024 award was presented in September 2024 based on data gathered within 12 months preceding the issue date. Advisors pay a fee to hold out marketing materials. Not indicative of advisor’s future performance. Your experience may vary. For more information, please visit www.fivestarprofessional.com.
