Optimizing after-tax cash yields, the $5m nightmare, stock market concentration, The Pathless Path
Dear Friends and Client Partners,
A number of you have expressed a desire in our financial planning discussions to leave the corporate world and pursue a second act within the next few years so I figured I’d make that the topic of today’s Deep Dive.
But first, a quick update on some optimizations we’ve made to your wealth strategies.
Systematic Upgrades
Focus: After-Tax Cash Yield Optimization
We have updated our cash algorithms to maximize your individual after-tax yield across more than a dozen ultra-short-term vehicles—ranging from state-exempt Treasuries to Municipal MMFs. For clients who have granted us discretionary authority, we have already executed the shift to the highest-yielding instrument based on your specific tax bracket.
If you aren’t a client, check your cash yield today; your advisor may be leaving your capital idle. Our algorithms found no instance where a default ‘sweep’ or standard money market position outperformed our client-recommended solutions.
Deep Dive
Leaving a C-Level Corporate Career
I was having a conversation with a good friend (who is also a client) recently about the corporate climb and how the desire to continue up that ladder has become inversely proportional to net worth.
Like me, my friend is a former C-level executive who has transitioned out of the corporate world. We laughed about the scene in Succession when Connor and Tom are advising Cousin Greg on the perils of a $5m net worth:
“You can’t do anything with five, Greg. Five is a nightmare. Can’t retire. Not worth it to work. Poorest rich person person in America… The weakest strong man at the circus.”
We put aside the question of whether five million is enough to retire on. It really depends on your lifestyle.
The “Not worth it to work” part is what we talked about. This mid-million net worth is when many people suddenly have enough saved up to viably walk away from a corporate salary.
And when you have enough to walk away from the corporate climb you start asking yourself a lot of questions once the kids are down and you’ve caught up on Slow Horses.
It’s not just about running the numbers again and again to see if you have enough to step away and start that boutique consultancy or live your dream of running your own coffee shop plus wine bar.
The biggest questions that confront you are those relating to your identity.
If you’ve spent nearly two decades climbing a specific career ladder, it will look like an awfully long way back down when you’re ready get off. Whether you have $5m or $50m, you’ve merged a massive part of your identity with your career.
Questions like, Who am I if I’m not the “Global Chief Information Officer” of a respected advertising agency? What if I become the person important people used to call, but no longer do? What if these are the golden years of my career and I regret stepping away when I was at the top?
It’s these questions that prevent many people from making that much anticipated jump off the ladder.
Instead of confronting these questions head on, you delay by telling yourself “just one more year” or “just another $200k” to be extra sure I have what I need to support my post-corporate lifestyle.
I encountered all of these questions when I left my C-level position.
Running the numbers over and over again was really just a proxy for the bigger questions that face anyone leaving the corporate track to start a second act.
At the end of the day, the numbers in a spreadsheet are just a part of the decision to leave a corporate career. The real fears tie to who you are without the title. It’s the fear of the silence. It’s the realization that when you aren’t the one holding the multi-million dollar budget, the phone might stop ringing. That’s a structural shock most advisors aren’t equipped to help you navigate since they’ve never done it.
Here were a few things that I found helpful in giving me the confidence to finally make that leap:
- Something to run towards: If you’ve been entertaining notions of leaving the corporate world for a while, there’s a high probability you’re burnt out. You’ve likely spent years thinking about what you’re running away from—the back-to-back meetings on topics that no longer spark curiosity, the client that always seems to have urgent firedrills, etc. But if you don’t have a clear vision of what you’re running towards, then you’re just jumping into a black abyss.
- Someone to talk to: I found it helpful to talk to other people who had made this decision. Very few people know what it’s like walking away from a C-level title and a yearly salary multiples higher than the average retiree’s nest egg. At Kangpan & Co. we’re not just building your wealth, we’re creating a close-knit community. If you’d like to talk to other former executives and senior leaders who have left the corporate world we can easily arrange that.
- An income-centric financial strategy: When I gave my notice, I didn’t want to rely on spending down a generic 60/40 portfolio that was subject to the whims of the market. I built a specific income-centric strategy designed to replace a steady paycheck. It turned my portfolio from a static number on a screen into a functional cashflow to support my next chapter. Some of you have asked about this income strategy in various conversations so I’ll write more about this in future posts. It is, of course, available to any clients of the firm.
I’m always happy to talk to any of you about the emotional as well as the financial side of making this kind of decision. Most advisors want to talk to you about your ‘Risk Tolerance’ for the stock market. I’d rather talk about your ‘Risk Tolerance’ for staying in a career that no longer fits the person you’ve become.
Food for Thought
A collection of articles or books I’ve read that might be interesting to many of you.
- This Christmas, Raise a Glass to Concentrated Market Returns via the Economist: A reminder that it’s not that unusual for a handful of firms to drive the bulk of the returns in each stock market cycle. That doesn’t mean we shouldn’t be wary of a crash when the concentration increases in each cycle. It’s just about realizing that this has and will always be a feature, not a bug, of capitalism-led stock markets. As the Economist notes:
“Hendrik Bessembinder of Arizona State University notes that among listed American firms from 1925 to 2023, most have negative returns. Less than 3% of stocks account for all the increase in shareholder wealth in that time.”
- The Pathless Path by Paul Millerd: One of the more influential books I read while I was thinking about whether to leave my corporate career. Mostly about the tradeoffs between the predictability of a corporate career vs. the freedom of working in a more independent role. Here’s a great quote:
“We like to think that once we ‘make it’ we can finally be ourselves, but… it was clear that the longer people stay at a company, the higher odds that they become what the company wanted. I realized I didn’t want that to happen to me”
Thank you for the continued partnership and for the opportunity to help steer your family’s capital toward what matters most.
Nathan
Founder & Lead Advisor
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Disclosures: This content is for educational purposes only and is not investment, tax, or legal advice. No post is an endorsement of any particular strategy or security. We do not receive any direct payments or commissions for securities discussed in our posts. Employees and clients of Kangpan & Co. may hold positions in securities discussed in posts. Speak with a licensed tax, legal, or financial advisor before making any changes to your investments or financial strategies. Past performance is no guarantee of future returns. Investing involves risk including the loss of capital.
Kangpan & Co. 