Risk Management continued from page 55
The same holds true for inheritors who have received sizable stock holdings from parents, grandparents or other loved ones. Advisors can help clients hold onto these positions while also efficiently managing the risks and taxes involved. And in that way, the advisors also show their value.
Diversification Approaches That Preserve After-Tax Wealth
Advisors can also offer strategies that help improve a client’ s after-tax outcomes. These approaches can include:
• Structuring tax-efficient transitions so that the taxable impact of large stock holdings is spread out over time;
• Using unified managed accounts( UMAs) that coordinate seamless, taxefficient portfolio transitions; and
• Using direct indexing for optimizing tax-loss harvesting in portfolios.
Furthermore, advisors can harness automated technology solutions that systematically monitor concentrated stock holdings for clients across their practices. Some of the wealth-tech advisory platforms available in today’ s marketplace can alert advisors when their clients’ portfolios exceed stock-concentration thresholds and also give advisors the chance to immediately, proactively discuss ways to address the risk with those clients.
These platforms come with visualization tools so advisors can help clients understand the hedging or diversification strategies and decide which one is best. Afterward, the platforms can monitor the portfolios and the chosen strategies over time, and the advisors can revisit them with clients in annual meetings.
If home offices and smaller RIAs cannot adopt advanced technology platforms, they can outsource the management of concentrated stock holdings to external partners— specialists who can handle structured diversification approaches, tax-efficient portfolio transitions, options overlays and other solutions for decreasing single-stock exposure risk without requiring advisors to hire more staff.
The Opportunity Ahead
Advisors who find ways to address the risks of concentrated positions help their clients protect wealth— as well as dampen risk across their entire book of business. What’ s more, they can demonstrate significant value for high-net-worth clients at scale.
MICHAEL FEATHERMAN is head of investment product consulting and high-net-worth services at Envestnet.
Parting Shot continued from page 60
your wife want about $ 120,000 a year. If you claim now or at full retirement age, your benefit might cover $ 50,000. That leaves $ 70,000 coming from the portfolio every year— regardless of markets.”
He glanced at the next table where a nicely dressed couple ordered a seafood tower.“ That feels … normal.”“ It’ s common,” I said.“ It’ s also where a lot of good plans break.” The volatility-buffer design is straightforward:
• Delay to 70 and let the benefit grow.
• Fund the gap with a planned draw— often from a dedicated cash / short-term bond reserve— so equity sales become a choice, not a requirement, during a drawdown.
• When the higher benefit turns on at 70, the portfolio’ s required withdrawal rate drops for the next 20 to 30 years.
Practically, that can mean earmarking 24 to 36 months of distributions in cash or short-term bonds and using a simple rule: rebalance from equities after recoveries
( not during panic weeks).“ So, I’ m trading a few leaner years for a bigger floor forever,” Mark said.
“ Exactly,” I replied.“ You take smaller bites early so you don’ t get forced into big bites later.”
How Advisors Can Use This Here’ s a checklist of action items for advisors who want to use the strategy:
1. Diagnose the red zone: An advisor should stress-test the first five to 10 years, not just the average-return projection.
2. Coordinate claiming with withdrawals: Advisors should treat Social Security as part of the household’ s distribution policy. Then they should build the portfolio withdrawal plan around that claiming decision. If the strategy is to delay benefits to age 70, map the“ gap years” month-by-month so the client knows exactly which dollars will fund spending before the larger check starts; that clarity reduces the temptation to claim early simply because the market is down.
3. Build the bridge: Use a simple model: reserves plus a written withdrawal policy plus a rebalancing rule. In practice, that usually means earmarking 24 to 36 months of planned distributions in cash / short-term bonds( or a short bond ladder) so equity sales become a choice, not a requirement, during drawdowns. To ensure clients grasp the concept, create a preset plan for which accounts get tapped first and when to rebalance back toward target after recoveries.
4. Confirm fit: Advisors must take into account the client’ s health, longevity expectations, their survivors’ needs, taxes( including the extra surcharge they will have to pay on Medicare premiums), and cash flow.
The Line I Left Mark With
As we stood up to leave, Mark folded his spreadsheet and looked back at me.“ So Social Security isn’ t just a check,” he said.“ It’ s a strategy.”
“ Exactly,” I told him.“ And in volatile markets, strategy keeps a downturn from becoming a permanent pay cut.”
RAY R. HARRIS, MBA, RSSA, is the founder and president of Social Security Claiming Experts, a national advisory firm dedicated exclusively to optimizing Social Security claiming strategies for the mass affluent.
58 | FINANCIAL ADVISOR MAGAZINE | MAY / JUNE 2026 WWW. FA-MAG. COM