22 July 2021 13:54:28

Financial adviser’s invaluable tips for CEOs transitioning between gigs

Regardless of whether it was your call or forced upon you, it is important to have a back-up plan when between roles. And as every CEO knows, a plan is only as good as the sum of its components.

Decisions made between jobs have a lasting impact on your financial health. This step-by-step checklist breaks down the task into clear, manageable steps to help ensure that this impact is a positive one.

Catch up with your advisors

Put your new-found free time to good use: book an appointment with your support team, starting with your financial adviser. If you don’t have one, it’s a great time to start.

Your changed circumstances will likely present both new opportunities to explore and challenges to be aware of. Tailored advice can help you navigate these and cover any lost earnings and hopefully the quality advice will pay for itself and then some.

Have an emergency fund

This is finance 101. Surprisingly though, many business leaders have contingencies for the company but not themselves.

An emergency cash stash can cover any income shortfalls, such as taking longer than expected to land your next role or having to quit suddenly for health reasons. Aim for six months of expenses and financial commitments as a healthy buffer. If you don’t have it, then getting advice as to where to get it from in the most tax effective manner is key.

Rationalise your job prospects

Consider what your next role could look like and what resources you may need to get it.

For previously salaried CEOs, consider whether self-employment is an option. Could you/should you start your own business? Or become a consultant?

For serial entrepreneurs, can you live on the proceeds of the business sale? How does that affect your ability to invest in future ventures? Alternatively, would you consider a salaried position? And would that require extra qualifications?

Check the calendar

Managing finances between roles depends a lot on where the gap falls within the financial year:
Does it make sense to sell assets in years where your taxable income is lower?
If your partner is still earning good money, should they make spousal contributions into your super to offset their own tax? Should you super split for access to super?
If your earnings drop sharply, you may receive a sizeable tax refund. What will that money be used for?

Planning ahead can avoid nasty surprises and lost savings.

Consider your super

CEOs in the later years of their career may be eligible to access superannuation. If so, should you? Think about your circumstances, super balance and whether you are willing to retire early should you not find a new role of interest.

If you do draw from super and then begin a new role, consider using carry-forward contributions to repay those funds.

Revisit your insurances

This is perhaps the most overlooked step. What happens to your personal insurances between roles?

Some factors to consider include:
Whether you are still covered by the firm’s policies
Whether your super is in a corporate fund and if so, should it stay there once you’ve left
You may lose your cover once employer superannuation contributions cease

Don’t leave it until you need to make a claim to discover you’re no longer covered and seek advice before you consolidate your superannuation to avoid a big mistake.

Examine share options

Many CEOs receive shares and options as part of their remuneration structure. Analyse exactly what you have and what to do with them.
Do you take up any outstanding options? Should you keep or sell the shares you have? If selling them, when should you do so? And how do you cover any capital gains liability or manage any losses?

Revisit your investments

If you have investments in a trust, the time between jobs may present a tax-effective opportunity to allocate yourself funds.

Look at your other investments too. Do you sell some to maintain your income? How would that affect your future earnings?

Do a debt check

Whenever your employment status changes, it’s important to check in with your debts.

Can you make the repayments on a reduced income?
Will your payout wipe out the remaining mortgage?
If you were self-employed and the business failed, are there debts outstanding? Does that leave losses in the company structure? How do you soak up those losses in the future?

Have a health check

While fretting about jobs and finances, it can be easy to overlook your health.

When was the last check-up with your GP? Consider your mental health too: adjusting to life without work and its social connectivity can be challenging. Remember mental health claims fall under income protection, so do you need to claim?

Be kind to yourself. Use this opportunity to your advantage and you’ll be far better placed for your next gig.

Helen Baker is a licensed Australian financial adviser and author of On Your Own Two Feet: Steady Steps to Women’s Financial Independence and On Your Own Two Feet Divorce: Your Survive and Thrive Financial Guide.

Note this is general advice only and you should seek advice specific to your circumstances.