Fundamentals for an Entrepreneur’s Financial Planning

As appeared in Estate Planning Magazine by Thomson Reuters 

Henry David Thoreau famously wrote: “If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.” In the realms of business-the seers and visionaries blaze the fresh trails and steer the vessels of commerce into uncharted waters of bounty. Farsighted entrepreneurs and insightful executives are the castle builders of this parlance, yet despite their acumen for staying “ahead of the curve” in their macro-endeavors, the same often cannot be said of there attention to the more personal details of their financial lives.

This is the platform on which a team of veteran wealth management advisors from a Boston-based firm (The Colony Group) have fashioned their new guidebook for the enterprising movers and shakers among us, titled Personal Financial Planning for Executives and Entrepreneurs: The Path to Financial Peace of Mind.

Using a young, financially successful (but somewhat native) fictitious couple named David and Abbey as reference figures, the authors illustrate the dangers and pitfalls that can befall even the most talented individuals when ignorance is an active agent in their personal decision-making process. What people do not know can hurt them. The authors point out early on that the majority of top corporate executives and successful entrepreneurs do not come from managerial backgrounds, but qualities that contribute to their vital broad-based “visionary” attributes may impede adequate understanding of the many complexities surrounding executive compensation that can have great bearing on their comprehensive financial welfare.

The authors posit that a key to financial planning for this august population should be the goal of “peace and mind.” This, in turn, is achieved through establishment and maintenance of what they term “The Five Pillars” comprised of these interrelated goals:

  1. Maximizing rewards of being an executive.
  2. Financial independence.
  3. Minimizing taxes.
  4. Planning for others.
  5. Managing risk.

Individual chapter discussions tackle topics that construct these “pillars”, such as investment strategies (Chapter 7), taxation planning (Chapter 8), philanthropic giving (Chapter 10), and the role of health and life insurance in comprehensive planning (Chapter 11). The chapter discussions are concise and to-the-point. Tables, charts, and illustrations abound, as well as the application of key points to the education of the omnipresent David and Abbey. Endnotes appear at the conclusion of each chapter. An index rounds out the volume.

The volume, although directed at a specialized audience, carries messages of value to the larger public audience. To be sure, not everybody garners professional compensation packages that include stock options and deferred compensation plans, but regardless of one’s situation, in the personal financial planning realm, fundamentals are fundamental. Knowledge is power and choice. Ignorance is the enemy of bliss. An entertaining and useful guide.