Your clients aren't under-advised. They're un-coordinated

Business owners and equity-compensated executives who have built substantial wealth often still carry an outsized, unmanaged risk on their balance sheets, despite paying significant sums for professional advice.

Scottsdale, Arizona-based WestPac Wealth Partners notes that concentration risk is a persistent threat for clients who hold most of their net worth in a single business or stock position, with the issue frequently affecting families who already retain a CPA, an attorney, and a wealth manager, sometimes spending tens of thousands of dollars annually across that team.

Creighton Hardy, CFP, ChFC and wealth management advisor at WestPac Wealth Partners, said the shortfall isn't a lack of professional input but a lack of coordination between the professionals involved.

"These families are not under-advised. They are un-coordinated," Hardy said. "They are paying premium prices for a team of professionals and receiving four separate opinions. Each advisor is doing their job. Nobody is doing the design. So the largest risk on the balance sheet sits untouched, not because anyone failed, but because the work was done in the wrong order."

Advisors typically emphasize diversification within managed portfolios, but WestPac said the biggest concentration for many clients sits elsewhere entirely, either tied up in a company an owner has spent years building or accumulated through employer stock via options, restricted stock units, and purchase plans.

Hardy described this dynamic as a hidden cost for those building wealth for the first time in their families.

"Concentration risk is the silent tax on first-generation wealth," Hardy said. "Business owners hold it in their company. Executives hold it in their employer's stock. Both groups believe they're playing it safe because they're investing in what they know. In reality, they may be exposing their financial future to a single point of failure."

Hardy argued that framing the issue purely as a portfolio matter understates its scope.

"The biggest position on most balance sheets isn't found inside a brokerage account," Hardy said. "Treating concentration risk as a portfolio problem misses the larger issue. It's a balance-sheet problem that requires coordinated tax, estate, and investment planning."

Planning strategy reversed

WestPac's approach to tackling concentration risk involves flipping the typical sequence many families follow.

Rather than accumulating a concentrated position first and figuring out diversification later, the firm designs the overall financial structure upfront, then builds wealth outside that position while working to limit unnecessary tax exposure.

For business owners specifically, this means building personal assets alongside the business itself instead of waiting until a sale takes place. Tools cited include defined benefit plans, cash balance plans, and other tax-oriented strategies intended to shift capital off the business balance sheet gradually without straining cash flow.

Hardy said a common misstep is treating an eventual exit as the starting point for wealth creation.

"One of the biggest mistakes we see is waiting for an exit to create personal wealth," Hardy explained. "That is building backwards, the asset first and the design later. The exit may happen later than expected, or it may never happen at all. Building assets outside the business, in parallel with it, creates flexibility and reduces dependence on a single future event."

Tax-conscious diversification

Executives and professionals holding concentrated stock positions face a similar issue, and WestPac recommends tax-conscious diversification spread across several years rather than executed in one transaction. Hardy said the firm regularly encounters clients whose net worth is overwhelmingly tied to one company's shares.

"We regularly meet individuals with 60, 70, or even 80 percent of their net worth tied to ticker symbol," Hardy said. "Through strategies such as direct indexing, donor-advised funds funded with appreciated shares, exchange funds, and staged sales aligned with lower-income years, investors can often reduce concentration risk significantly while maintaining greater control over taxes."

Hardy attributed failed diversification efforts to structural rather than strategic causes, noting that affluent families often already employ the necessary specialists but lack integration between them.

"Most affluent families already have the professionals," he said. "What they are paying for is a team. What they are getting is four specialists optimizing four corners. Diversification fails when tax, protection, estate, and investment decisions happen independently. The architecture must be designed first and then executed as a unified plan. Right work, in the wrong order, is still the wrong outcome."

He added that the presence of concentration risk isn't really in question for most of these clients, the real issue is whether it's being actively managed.

"The question isn't whether concentration risk exists," Hardy added. "The question is whether you're intentionally managing it. Building wealth is difficult. Protecting it requires a different level of planning."