Thirty-two Massachusetts companies went public or filed to go public in 2014 according to IPOMonitor. 2015 could be a rich year as well for those who convert to public from private ownership. If you will be among them, what are the three most important steps to take related to your investments?
Public means public!
When you are the founder or C-level executive of a public company, your expectation for privacy largely evaporates. Your salary and net worth will be seen (or assumed) by lots of people you’ve never met. As the company stock price rises, so will the attention from a wide range of brokers, advisors and others hoping to share in your good fortune.
Your newfound popularity can quickly become a nuisance and distraction. That’s why it’s important to be prepared for it. We suggest the 3 P’s:
Now is the time to ask tough questions of your current investment advisor: Have my needs exceeded your reach? Can you do more than manage my portfolio? Can you help me understand and use SEC rules to my benefit? Can you provide the comprehensive services of a family investment office to coordinate my investment, tax, trust and insurance needs? Can you help me separate career risk and market risk? Can you help me think about what my assets mean for future generations? (Remember, if you don’t use an advisor, you have to ask these questions of yourself!)
Visit other advisors, in person or via the internet and ask the same questions. Make the investigation not about what they want to sell you, but about how they can meet your needs. Be specific. Make a list of the three to five most important things to you (security, family focus, someone to talk it over with…) and challenge all firms to meet and exceed your expectations. Use your popularity as a current or impending IPO to ask for everything you want. You are at the maximum point of leverage, so use it!
Connection and trust in your advisor is essential, but don’t stop there. Maximize your security by watching the details. Ask more questions, starting with:
- Custody – Are my assets are held by a third party, not my manager?
- Fiduciary – Is my advisor required by law to always act in my best interest?
- Transparency – Exactly how much am I paying and why?
Above all, what’s in it for me?
The firm that is taking your company public may “invite” or pressure you to manage your money. Or you may feel guilty if you don’t since the investment bankers have done so much work. As sincere as that offer may sound, know that by the next deal you will be old news. Investment bankers get paid to work on new deals. And they have no involvement with your personal investments. Any firm that gets your business has to stand on its own merits long after your first day as a public company.
Any time you are evaluating an investment professional to ask yourself “what’s in it for me?” If you like that answer then you are on the right track.
John Osbon – firstname.lastname@example.org
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Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
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