In the season 6 finale of Financial Perspectives, Tanya Suba-Tang sits down with King Lip, CFA, CMT - Chief Strategist at BakerAvenue Wealth Management - to explore the complexities of concentrated stock positions and the growing challenges they present for investors, executives, and advisors alike.

King explains how concentrated positions often develop through long-term success—particularly in technology and founder-led companies—and why the decision to diversify is rarely just financial. The conversation examines the tension between tax efficiency, liquidity needs, emotional attachment, and risk management, along with the behavioral biases that can keep investors overexposed for too long.

Looking ahead, they discuss how the rise of AI-related wealth creation, private secondary markets, and continued concentration in mega-cap technology companies could reshape portfolio strategy in the years ahead. From tax planning strategies to broader market implications, the episode explores how advisors are helping clients navigate increasingly concentrated sources of wealth in a rapidly evolving investment landscape.

Lindsey Helman: Hello and welcome to Financial Perspectives.

Lindsey Helman: A CFA Society San Francisco

Lindsey Helman: podcast where we explore trends

Lindsey Helman: shaping the investment and

Lindsey Helman: finance industry with experts in

Lindsey Helman: their field.

Lindsey Helman: This month, host Tanya Suba Tang had the pleasure of speaking

Lindsey Helman: with King Lip of Baker Avenue.

Lindsey Helman: Listen in as they explore the growing challenges of

Lindsey Helman: concentrated stock positions and how advisors are navigating tax

Lindsey Helman: strategy, diversification, behavioral decision making and

Lindsey Helman: risk management, and an increasingly tech driven market.

Tanya Suba-Tang: Good morning, King. Thank you so much for joining me.

Tanya Suba-Tang: How are you today?

King Lip, CFA, CMT: I'm doing fine.

King Lip, CFA, CMT: Thanks for having me, Tanya.

Tanya Suba-Tang: So today we're going to talk about concentrated stock.

Tanya Suba-Tang: And for listeners who might not

Tanya Suba-Tang: be familiar, can you talk us

Tanya Suba-Tang: through or walk us through what

Tanya Suba-Tang: concentrated stock are and what

Tanya Suba-Tang: position actually what the

Tanya Suba-Tang: concentration stock position

Tanya Suba-Tang: actually is?

King Lip, CFA, CMT: Yeah, I'll be happy to go through that.

King Lip, CFA, CMT: we define a concentrated stock position as a position that's at

King Lip, CFA, CMT: least twenty percent of a client's net worth.

King Lip, CFA, CMT: but typically we see that it's a lot higher.

King Lip, CFA, CMT: You know, usually it's more like seventy five percent of a

King Lip, CFA, CMT: client's net worth sometimes could be over ninety percent of

King Lip, CFA, CMT: a client's net worth.

King Lip, CFA, CMT: but typically it's one or two holdings.

King Lip, CFA, CMT: That really is what the client

King Lip, CFA, CMT: has and what their financial net

King Lip, CFA, CMT: worth is.

King Lip, CFA, CMT: Is all in.

Tanya Suba-Tang: So are there any sectors right now where you're seeing a lot of

Tanya Suba-Tang: this kind of concentration or even some exciting growth

Tanya Suba-Tang: stories you you're aware of?

King Lip, CFA, CMT: Yeah, that's a good question.

King Lip, CFA, CMT: not surprisingly, the

King Lip, CFA, CMT: concentration, in terms of

King Lip, CFA, CMT: sectors mostly comes from

King Lip, CFA, CMT: technology.

King Lip, CFA, CMT: for example magnificent seven right.

King Lip, CFA, CMT: Those seven stocks we see all the time, you know, so names

King Lip, CFA, CMT: like Apple, Apple has printed gosh, thousands of millionaires

King Lip, CFA, CMT: if you would.

King Lip, CFA, CMT: Nvidia is another one.

King Lip, CFA, CMT: meta Microsoft alphabet.

King Lip, CFA, CMT: there was a recent study actually that looked at Nvidia

King Lip, CFA, CMT: in their employees.

King Lip, CFA, CMT: And what they found was that eighty percent of employees at

King Lip, CFA, CMT: Nvidia are multimillionaires.

King Lip, CFA, CMT: So that's about twenty thousand or so people out of the

King Lip, CFA, CMT: workforce that are multi-millionaires at Nvidia,

King Lip, CFA, CMT: which is pretty amazing.

King Lip, CFA, CMT: But it's not just tech, you know.

King Lip, CFA, CMT: We actually have an office.

King Lip, CFA, CMT: I'm located in San Francisco.

King Lip, CFA, CMT: but we also have an office in Texas, so we see a lot of

King Lip, CFA, CMT: energy, money as well.

King Lip, CFA, CMT: Energy concentrations for, for clients, industrial companies.

King Lip, CFA, CMT: there is one common denominator though.

King Lip, CFA, CMT: The, it has to be a successful

King Lip, CFA, CMT: company, you know, in order for

King Lip, CFA, CMT: a position to be a concentrated

King Lip, CFA, CMT: position.

King Lip, CFA, CMT: Because if the company wasn't

King Lip, CFA, CMT: successful, it's not, it's not

King Lip, CFA, CMT: going to drive a lot of returns,

King Lip, CFA, CMT: right?

King Lip, CFA, CMT: for clients.

King Lip, CFA, CMT: So we don't see any Walgreens,

King Lip, CFA, CMT: we don't see any bed, Bath and

King Lip, CFA, CMT: Beyond, you know, those

King Lip, CFA, CMT: companies are pretty much made

King Lip, CFA, CMT: obsolete.

King Lip, CFA, CMT: if you would, I have some come

King Lip, CFA, CMT: across some interesting growth

King Lip, CFA, CMT: stories since you asked about

King Lip, CFA, CMT: that.

King Lip, CFA, CMT: typical clients, as I mentioned, are former or current executives

King Lip, CFA, CMT: of a company, employees that have been at a company for a

King Lip, CFA, CMT: very long time.

King Lip, CFA, CMT: but, you know, we have some atypical clients, if you would.

King Lip, CFA, CMT: You know, people who were not at the company, but they were long

King Lip, CFA, CMT: term shareholders that have held the stock for a very long time.

King Lip, CFA, CMT: because they like the company, you know.

King Lip, CFA, CMT: So for example, we have a realtor who bought Tesla's stock

King Lip, CFA, CMT: in twenty twelve, twenty thirteen, never sold a share

King Lip, CFA, CMT: despite his friends and family saying, you have to sell Tesla.

King Lip, CFA, CMT: He didn't listen to them at all.

King Lip, CFA, CMT: And lucky he didn't because that that position is now worth over

King Lip, CFA, CMT: ten million dollars.

King Lip, CFA, CMT: So he's no longer a realtor.

King Lip, CFA, CMT: as you can imagine.

King Lip, CFA, CMT: there's, this is a wonderful one.

King Lip, CFA, CMT: He's a hairdresser and this person's a hairdresser.

King Lip, CFA, CMT: He owned Apple shares when Steve

King Lip, CFA, CMT: Jobs was the CEO the first time,

King Lip, CFA, CMT: right.

King Lip, CFA, CMT: Because Steve Jobs was CEO of two times, but he was there the

King Lip, CFA, CMT: first time before Steve Jobs got fired as the CEO.

King Lip, CFA, CMT: this is back in the Nineteen eighties, and he held a stock

King Lip, CFA, CMT: throughout this whole time.

King Lip, CFA, CMT: Even when the company almost

King Lip, CFA, CMT: went bankrupt in nineteen ninety

King Lip, CFA, CMT: seven, Apple almost went

King Lip, CFA, CMT: bankrupt in nineteen ninety

King Lip, CFA, CMT: seven.

King Lip, CFA, CMT: He held the stock throughout

King Lip, CFA, CMT: this time, and lo and behold,

King Lip, CFA, CMT: he's worth quite a quite a quite

King Lip, CFA, CMT: a bit right now, owning the

King Lip, CFA, CMT: Apple shares.

King Lip, CFA, CMT: And finally, there's a doctor

King Lip, CFA, CMT: that, actually just recently

King Lip, CFA, CMT: became a client of ours who

King Lip, CFA, CMT: owned Nvidia, not because of the

King Lip, CFA, CMT: AI, but because he liked playing

King Lip, CFA, CMT: video games.

King Lip, CFA, CMT: And he knew that Nvidia was a graphics card maker and he

King Lip, CFA, CMT: decided to buy some shares.

King Lip, CFA, CMT: Nvidia didn't know that they

King Lip, CFA, CMT: were going to be the AI leader

King Lip, CFA, CMT: of today.

King Lip, CFA, CMT: So there's some really

King Lip, CFA, CMT: interesting stories we come

King Lip, CFA, CMT: across in terms of growth

King Lip, CFA, CMT: stories.

Tanya Suba-Tang: Oh, wow.

Tanya Suba-Tang: Those are fun growth stories.

Tanya Suba-Tang: I hope to be one one day.

King Lip, CFA, CMT: Yeah. Me too.

Tanya Suba-Tang: but kind of, you know, taking

Tanya Suba-Tang: that into mind, you know, we

Tanya Suba-Tang: chatted earlier, before we got

Tanya Suba-Tang: into this podcast about mindset,

Tanya Suba-Tang: the mindset required to manage

Tanya Suba-Tang: concentrated socks.

Tanya Suba-Tang: And you kind of alluded to a lot

Tanya Suba-Tang: of these stories in the growth

Tanya Suba-Tang: stories.

Tanya Suba-Tang: Can you share some real world advice or strategies?

Tanya Suba-Tang: You've seen work for people in that situation, especially if

Tanya Suba-Tang: we're handling risk and emotional up and downs.

King Lip, CFA, CMT: Yeah. Great question.

King Lip, CFA, CMT: first of all, concentrated stock management is one of the fastest

King Lip, CFA, CMT: growing areas, in terms of wealth management and especially

King Lip, CFA, CMT: the need for clients.

King Lip, CFA, CMT: it's a complicated topic.

King Lip, CFA, CMT: it's for most clients, as you can imagine, it's probably one

King Lip, CFA, CMT: of the most important financial decisions that the client can

King Lip, CFA, CMT: make in their lives.

King Lip, CFA, CMT: Right?

King Lip, CFA, CMT: because they could, it could really make or break them.

King Lip, CFA, CMT: Right.

King Lip, CFA, CMT: So these clients are looking for advisors, smart advisors that

King Lip, CFA, CMT: have, have the experience to, give them good advice.

King Lip, CFA, CMT: So some of the challenges, for example, that, that these

King Lip, CFA, CMT: clients face and we as advisors face, as I mentioned, first of

King Lip, CFA, CMT: all, it's complicated.

King Lip, CFA, CMT: They don't know all the tools

King Lip, CFA, CMT: that are available to them to

King Lip, CFA, CMT: manage their concentrated stock

King Lip, CFA, CMT: position.

King Lip, CFA, CMT: Bad planning can literally cost them hundreds of thousands of

King Lip, CFA, CMT: dollars, if not millions of dollars left on the table.

King Lip, CFA, CMT: tax exposure is a major one, you

King Lip, CFA, CMT: know, facing holders of

King Lip, CFA, CMT: concentrated positions.

King Lip, CFA, CMT: The reason why is typically they

King Lip, CFA, CMT: hold a very, very low cost

King Lip, CFA, CMT: basis, right.

King Lip, CFA, CMT: They've held these shares for so long that if they do sell,

King Lip, CFA, CMT: they're they're going to pay a lot to Uncle Sam.

King Lip, CFA, CMT: So, what our job is, is to

King Lip, CFA, CMT: introduce them to smart

King Lip, CFA, CMT: strategies like tax loss

King Lip, CFA, CMT: harvesting strategies,

King Lip, CFA, CMT: charitable remainder trusts,

King Lip, CFA, CMT: exchange funds.

King Lip, CFA, CMT: So complication is one of the factors that these clients face.

King Lip, CFA, CMT: The second one is emotional.

King Lip, CFA, CMT: there's an emotional attachment to the stock.

King Lip, CFA, CMT: Believe it or not.

King Lip, CFA, CMT: There's feelings of guilt, you

King Lip, CFA, CMT: know, because some of these

King Lip, CFA, CMT: investors have been at the

King Lip, CFA, CMT: company or held the stock for so

King Lip, CFA, CMT: long and made them so rich they

King Lip, CFA, CMT: actually feel guilty for

King Lip, CFA, CMT: selling.

King Lip, CFA, CMT: Selling the stock, which has been so good to them.

King Lip, CFA, CMT: second one is sentimental and

King Lip, CFA, CMT: this was a little bit of a sad

King Lip, CFA, CMT: story.

King Lip, CFA, CMT: You know, sentimental is, there

King Lip, CFA, CMT: was a widow whose husband had

King Lip, CFA, CMT: passed away in an untimely

King Lip, CFA, CMT: death.

King Lip, CFA, CMT: she was going through some

King Lip, CFA, CMT: depression because of his

King Lip, CFA, CMT: passing.

King Lip, CFA, CMT: The stock that she inherited

King Lip, CFA, CMT: from him was really sort of that

King Lip, CFA, CMT: connection that she still had to

King Lip, CFA, CMT: her husband.

King Lip, CFA, CMT: So she didn't want to rush into any financial decisions, as you

King Lip, CFA, CMT: can imagine, right?

King Lip, CFA, CMT: Like diversification obviously

King Lip, CFA, CMT: should be something that she was

King Lip, CFA, CMT: thinking about.

King Lip, CFA, CMT: But in this aspect, that

King Lip, CFA, CMT: emotional something, that

King Lip, CFA, CMT: emotional attachment is not

King Lip, CFA, CMT: something that we as that could

King Lip, CFA, CMT: be necessarily a financial

King Lip, CFA, CMT: decision.

King Lip, CFA, CMT: It's really most like a very sentimental emotional decision.

King Lip, CFA, CMT: So we have to manage the

King Lip, CFA, CMT: behavioral, which is in our

King Lip, CFA, CMT: opinion, probably the hardest

King Lip, CFA, CMT: thing to do and takes the most

King Lip, CFA, CMT: time.

King Lip, CFA, CMT: And you just got to be patient.

King Lip, CFA, CMT: the third one, which I think is

King Lip, CFA, CMT: kind of funny, um, is clients

King Lip, CFA, CMT: who have FOMO, which is fear of

King Lip, CFA, CMT: missing out, you know, because

King Lip, CFA, CMT: the stock has been so good to

King Lip, CFA, CMT: them.

King Lip, CFA, CMT: In their view, there's no other

King Lip, CFA, CMT: stock that could do better,

King Lip, CFA, CMT: right?

King Lip, CFA, CMT: So like, oh, no, I don't want to sell it right now because

King Lip, CFA, CMT: there's so much upside.

King Lip, CFA, CMT: So it's our job to say, well,

King Lip, CFA, CMT: there's actually other stocks

King Lip, CFA, CMT: that can do just as well, if not

King Lip, CFA, CMT: better.

King Lip, CFA, CMT: in fact, one of the questions we

King Lip, CFA, CMT: asked a lot of these clients,

King Lip, CFA, CMT: let's just say this client has

King Lip, CFA, CMT: five million of XYZ stock,

King Lip, CFA, CMT: right?

King Lip, CFA, CMT: And doesn't want to diversify.

King Lip, CFA, CMT: One of the questions we ask is,

King Lip, CFA, CMT: look, if you had five million in

King Lip, CFA, CMT: cash today, would you buy XYZ

King Lip, CFA, CMT: stock?

King Lip, CFA, CMT: Usually the answer is no. So it's like, okay, why are you

King Lip, CFA, CMT: holding five million dollars worth of this stock?

King Lip, CFA, CMT: so it's our job to sort of to

King Lip, CFA, CMT: advise them on these many

King Lip, CFA, CMT: different tools.

King Lip, CFA, CMT: we, we manage through many complex financial behaviors.

King Lip, CFA, CMT: so sometimes we feel like we act

King Lip, CFA, CMT: like a psychologist more than

King Lip, CFA, CMT: more so than a financial

King Lip, CFA, CMT: advisor.

Tanya Suba-Tang: Yeah, I could see that.

Tanya Suba-Tang: A lot of emotional ties on it.

Tanya Suba-Tang: And just with the stories that you share.

Tanya Suba-Tang: so if you had to look ahead, I love this question.

Tanya Suba-Tang: Where do you think concentrated stock positions are headed?

Tanya Suba-Tang: And second half of that is, are

Tanya Suba-Tang: there any big trends or risks on

Tanya Suba-Tang: your radar that investors should

Tanya Suba-Tang: be paying attention to over the

Tanya Suba-Tang: next

King Lip, CFA, CMT: Mhm.

Tanya Suba-Tang: few years?

King Lip, CFA, CMT: Yeah. So in my opinion,

King Lip, CFA, CMT: concentrated stock positions

King Lip, CFA, CMT: have always been a challenge for

King Lip, CFA, CMT: investors.

King Lip, CFA, CMT: And this I would say, let's go

King Lip, CFA, CMT: back like almost one hundred

King Lip, CFA, CMT: years, right?

King Lip, CFA, CMT: Because if you think about the

King Lip, CFA, CMT: companies that went public, you

King Lip, CFA, CMT: know, the first railroads, if

King Lip, CFA, CMT: you would.

King Lip, CFA, CMT: Right.

King Lip, CFA, CMT: And these these people had the same problem, right?

King Lip, CFA, CMT: They have one stock in one company, one railroad.

King Lip, CFA, CMT: and it will continue to be a challenge for investors into the

King Lip, CFA, CMT: future, because, you know, there's going to be wonderful

King Lip, CFA, CMT: new companies that IPO, you know, no space may go IPO this

King Lip, CFA, CMT: year, for example.

King Lip, CFA, CMT: There's a lot of there'll be a

King Lip, CFA, CMT: lot of very wealthy employees

King Lip, CFA, CMT: from space.

King Lip, CFA, CMT: Right.

King Lip, CFA, CMT: So it will continue to be a problem.

King Lip, CFA, CMT: We think I think the big trends

King Lip, CFA, CMT: are access to private secondary

King Lip, CFA, CMT: markets.

King Lip, CFA, CMT: the reason why I say that is because companies are taking

King Lip, CFA, CMT: longer to go public these days.

King Lip, CFA, CMT: So imagine companies like

King Lip, CFA, CMT: Databricks, which is probably

King Lip, CFA, CMT: one of the largest, private

King Lip, CFA, CMT: companies that have not gone

King Lip, CFA, CMT: public yet.

King Lip, CFA, CMT: They recently did a, did a recent round of funding.

King Lip, CFA, CMT: There are about one hundred and thirty five billion in terms of

King Lip, CFA, CMT: market cap, and they haven't gone public yet.

King Lip, CFA, CMT: And there's people who've worked

King Lip, CFA, CMT: at Databricks for years and

King Lip, CFA, CMT: years and years and they're

King Lip, CFA, CMT: like, gosh, how come we're not

King Lip, CFA, CMT: going public?

King Lip, CFA, CMT: I need some liquidity.

King Lip, CFA, CMT: So a lot of these employees go into the private secondary

King Lip, CFA, CMT: markets to seek liquidity.

King Lip, CFA, CMT: So I think that will continue to

King Lip, CFA, CMT: be a big trend, on a going

King Lip, CFA, CMT: forward basis.

King Lip, CFA, CMT: And the third one and the final one is, a lot of the questions

King Lip, CFA, CMT: that we're answering now for clients, especially those who

King Lip, CFA, CMT: hold these very large positions in these tech companies.

King Lip, CFA, CMT: Is is there a bubble in the AI?

King Lip, CFA, CMT: you know, this AI race, if you would kind of like the dot com

King Lip, CFA, CMT: bubble, which I lived through and had advised clients.

King Lip, CFA, CMT: so that's the biggest risk right now.

King Lip, CFA, CMT: We don't personally think that

King Lip, CFA, CMT: we're in a bubble like the dot

King Lip, CFA, CMT: com era, but we probably, are on

King Lip, CFA, CMT: our way to become for, for a

King Lip, CFA, CMT: bubble, right?

King Lip, CFA, CMT: If this continues to, go up in

King Lip, CFA, CMT: an AI continues to be a huge

King Lip, CFA, CMT: growth opportunity.

King Lip, CFA, CMT: Some of these shares may very well become bubbles.

King Lip, CFA, CMT: So that's our job.

King Lip, CFA, CMT: We think in terms of advising

King Lip, CFA, CMT: clients of when that bubble may

King Lip, CFA, CMT: come and what to do, what

King Lip, CFA, CMT: actions to take if we do come

King Lip, CFA, CMT: across that.

Tanya Suba-Tang: Well, a lot to look forward to.

Tanya Suba-Tang: And, you know, thank you so much for sharing your insights.

Tanya Suba-Tang: I know I learned a lot and I really love those stories that

Tanya Suba-Tang: you shared with us today.

King Lip, CFA, CMT: Thank you.

Lindsey Helman: Thank you to this month's guest,

Lindsey Helman: King Lip, for joining us to

Lindsey Helman: share his insights on

Lindsey Helman: concentrated stocks.

Lindsey Helman: Be sure to join us for another episode of Financial

Lindsey Helman: Perspectives, released on the last Tuesday of each month.