Diversifying a concentrated position in Google
Challenge
Client was a Google employee who had most of his net worth invested in Google stock and stock options.
Although the client was a strong believer in the company, he was concerned about having his career and personal net worth concentrated in a single security. The client realized that events beyond his control could ruin his finances, and didn’t want to take that kind of risk with his future. The client’s stock positions were held at a significant unrealized capital gain, so he wanted a way to reduce the tax impact of his diversification strategy.
Solution
Develop a plan to sell a portion of Google stock holdings, deploying proceeds into an indexing tracking portfolio. Harvest losses from the index tracking portfolio.
Advisor Partners worked with the advisor and client to determine a plan to regularly sell a portion of his Google stock, while creating a more diversified portfolio with the proceeds of the Google sales. Within the diversified portfolio, Advisor Partners developed a plan to harvest losses to reduce the tax impact of the sales of Google stock.
Impact
The client reduced his concentration in Google stock, although he continued to have a meaningful investment in the company.
The diversified portfolio created by Advisor Partners tracked the client’s benchmark, and the losses harvested by Advisor Partners helped reduce the tax impact of the diversification strategy.