There are many types of financial advisors to hire, who offer a multitude of services. How do you pick the right one? How do you know what to look for in a financial advisor? It can be complicated! At LRVS Advisory with our advanced knowledge and deep experience with biotech, pharma, and life sciences professionals and their challenges and opportunities, we help you make the most informed decisions at each step and provide you with a whole new level of clarity and control.

What does a financial advisor do?

In our experience at LRVS Advisory group, we have found that there are three typical items that a financial advisor will help a client working in the biotech, pharma and life sciences industry. A financial advisor will typically evaluate a client’s general risk tolerance, look at the clients existing assets and future savings ability, and may help solve questions regarding rebalancing accounts, reallocating cash or concentrated stock positions. 

In the next level in a relationship with an advisor, they might examine the client’s idol accounts, retirement funds, plan, and social security options. Whether the client is early in their career or thinking about retirement, the financial advisor will examine the client’s current plan and determine what steps should be implemented to create a successful path to retirement for the client. 

In a higher level of services, the advisor will take an overall snapshot of the client’s financial and family goals. Whether the client is married, has children, or plans to have children, the advisor will ask the client what their long term and short-term financial goals are. This is a key step to creating a successful partnership with a financial advisor, as well as successful future financial plan.

What additional unique services has LRVS provided for their clients?

Equity Based Compensation Diversification

We tend to see a lot of clients over leveraged in company stock either due to tenure at the company or stock price appreciation. Knowing the industry, your company, and the potential catalysts that may impact future pricing allow our team to create a more in-depth diversification strategy than a typical advisor. Depending on the types of stock-based compensation (RSUs, NQOs, ISOs, SARs, ESPP) there are different tax management strategies around the diversification. Depending on your access to material nonpublic information you may be subject to full black out or extended black out windows limiting trading ability without a 10B5-1 plan.  We help our clients identify the optimal way to diversify their equity position over time while managing the tax implication of do so. Often incorporating a 10B5-1 plan or tiered limit order trading approach.

Mergers, Acquisitions, IPO’s

In the world of Biotech, Pharma, and Life Sciences it is common to see smaller companies with great science get either picked up and acquired by larger firms or to get to later funding rounds that ultimately lead to an IPO.  Both circumstances can create newly acquired wealth for the employees at the impacted companies. It can be a great thing, but comes with added complexities and questions like:

  • How to manage tax consequences?
  • Can I control the disposition of stock?
  • Will there be any sort of change to equity holdings (Conversion, Reverse split, etc.)?
  • What does this mean for my short- and long-term financial goals?
Job Changes

As one of the most transient industries, biotech/pharma employees average time spent at one company is a little less than 13 months.  There are seemingly endless opportunities to advance one’s career. Often the fastest way to move up through the corporate hierarchy is by transitioning to another company, yet there are considerations that should not be overlooked with every move:

  • What will happen to my company stock plans?
  • Do I have a certain amount of time to exercise my options?
  • Do I need to do it before I leave?
  • What about my 401(k)?
  • Is there a vesting schedule on my match?
  • What does the new 401(k) look like?
  • How is it different? 

As a LRVS client, the advisor will help you in understanding compensation packages and model your financial plan around the offer you receive. 

401(k) Spillover

Often people are told to blindly max out their 401(k), and often that does make sense. However, if you and your partner are high earners some companies offer an additional service called a 401(k) spillover.  The maximum amount of money that can be put into a 401(k) per year is $58,000 (2021), which includes employee deferral, the company match and any excess allowed by the company’s plan.  If you as the client max out your 401(k) causing tax implications on withdrawal this could be a great option. You can contribute the excess to a spill over 401(k) and complete the annual in-service rollover. By contributing to the spillover 401(k) you can roll over this after-tax spillover contribution annually without paying income taxes on that specific spillover amount allowing it to grow tax-free for the future. 

Pension: Lump Sum versus Payout

While not as common as in the past, pensions are still offered at some of the biotech companies we work with. Some of those companies include Saint-Gobain, Merck, Pfizer, Bristol Myers Squibb, and AbbVie, to name a few.  Depending on the client’s career trajectory, age, and many other factors there may be an option to take a lump sum of the pension or take a lump sum payout in the form of a rollover (no tax consequence) when you leave the company.  We help run a benefit analysis through our financial planning models that will help determine the optimal choice for you and your family either at retirement or separation from the employer.

Personal Concierge Approach

LRVS practices the McAdam’s Advanced Advisory Model, an intelligent advisory model that integrates all three areas of financial planning: the financial, the personal — and the professional. Clients lean on us to act as their family’s “CFO”. Our personal concierge approach to wealth management includes introducing a team of outside professionals of accountants, mortgage consultants, estate attorneys and insurance brokers to ensure that every aspect of wealth management and financial planning is integrated into your overall plan.

We know that choosing a financial advisor isn’t easy, especially in today’s complex financial environment. There are several situations unique to the biotech, pharma and life sciences industries that require careful planning, that’s why LRVS Advisory Group provides customized solutions to meet our clients’ objectives and needs. From guidance and management around company equity to trading during black out windows, LRVS Advisory takes the complexity out of managing those financial challenges.

Why try to navigate those intricacies alone? Call us today to schedule a complimentary phone call and see how we can help you!

Sources

  1. https://www.investopedia.com/terms/i/insiderinformation.asp#:~:text=Insider%20information%20refers%20to%20non,insider%20trading%20and%20is%20illegal.
  2. https://www.williamblair.com/-/media/downloads/pwm/ces/williamblair-ces_10b5-1-faqs.pdf?as=1&la=en&hash=5750BA3A02A7160755D2011254BE90393BF625FF
  3. https://www.evaluate.com/vantage/articles/data-insights/ipo/biotech-listings-shows-few-signs-cooling
  4. https://www.forbes.com/sites/jeffkauflin/2017/02/15/the-industries-where-people-stay-in-their-jobs-the-longest/?sh=29ad17465b54
  5. https://www.fidelity.com/viewpoints/retirement/401k-contributions
  6. https://www.forbes.com/advisor/retirement/401k-contribution-limits/#:~:text=Total%20401(k)%20plan%20contributions,of%20an%20employee’s%20annual%20compensation. 
  7. https://www.fidelity.com/viewpoints/retirement/401k-contributions
  8. https://www.investopedia.com/articles/retirement/05/lumpsumpension.asp

*Disclaimer: Purshe Kaplan Sterling Investments and McAdam LLC dba LRVS Advisory Group are not affiliated companies. This article is provided by McAdam LLC dba LRVS (for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this article is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in this report is derived from sources that McAdam believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.