Kelsey: As an entrepreneur, there's a high fluctuation in wealth, until there isn't anymore. And, throughout my life, I have had times where I look like I have a lot of money on paper, but I don't have a lot of liquidity to be able to make movements.
Jamie: Meet Kelsey Falter. In college, she founded a tech company, secured over 2 million in funding, and landed on Forbes 30 Under 30 in tech. Four years later, she sold her startup to an industry giant, but that created a new problem.
Kelsey: Part of the compensation package was stock in a private company, so there was really no market for liquidity to happen. And that means that there's no space to use any of that for something like bootstrapping another company.
Jamie: That's right. Kelsey's already onto her next venture. And that liquidity crunch she describes? It's a common problem for founders with a concentrated stock position. There are strategies for this, and you're gonna hear some in this conversation between Kelsey and her financial advisor, Ara.
Ara: Kelsey's a killer. She and I hit it off immediately, and I have so much admiration for her.
Kelsey: The reason why I started working with Ara was the desire to have somebody who was a straight shooter, somebody who gave me the facts.
Jamie: Kelsey came to Ara looking for ways to fund her new venture, an AI company called Mother.tech. The name goes back to Kelsey's childhood.
Kelsey: My mother's business was my first job. It was a phone card business. And they had brochures that needed to be manually filled. So, she paid me a penny per brochure, and I would recruit all of my neighborhood friends to come. And we would just watch cartoons and then get some cash and get our nails done after that. And she had developers coming to our basement from the very beginning. So, I had coders next to me when I was doing my homework at the end of the day.
Jamie: Today, Kelsey's homework is a lot more complicated. She's an ambitious tech innovator who needs a financial strategy that keeps up with her big, bold ideas.
She needs liquidity to keep building Mother.tech. But she isn't just building the future, she's investing in it too. Her portfolio is built around her well-researched beliefs about where the world is heading next. She refers to it as thesis-based investing. This includes an investment in what she thinks will be an important resource for AI development, helium.
Plus, Kelsey's also a mom, so she's thinking about legacy planning for her daughter. Ara is her financial sounding board.
Kelsey: As I continue to mature and continue to be a rogue entrepreneur, part of what I take into consideration here is how am I working with someone who is smarter than me on a topic that I may not be putting my entire focus on?
Jamie: And that's where we'll start today. I'm Jamie Roô. Welcome to What Should I Do With My Money?, an original podcast from Morgan Stanley. Let's get into their conversation.
Ara: Kelsey, how are you doing?
Kelsey: Very well. Very well.
Ara: Great. So, let's kinda paint a picture here with your current situation. We have some of your assets in cash. We have some assets in our concentrated stock. And then we also have an exchange fund that we used to diversify some of your concentrated stock.
Jamie: An exchange fund is a type of investment that lets you exchange your single concentrated stock for a diversified potluck of shares after a certain amount of time. So, it helps you diversify while deferring your tax bill. See the show notes for more important information about exchange funds.
Ara: And then we have an investment that you actually came to us with, right? Um, this investment thesis around helium that you are interested in and would like to add to your portfolio. And so we have a small position in that. So, you know, the time is yours today. But, I think it would be really helpful to talk through some of the scenarios that we've actually been talking about most recently. And we can talk about how we can help.
Kelsey: Definitely. I think, those investments might be based off of a thesis that only matures over the course of a year. For example, when we did the helium investment, and I will continue to keep wanting to put funds into that, that is a longer time horizon than, you know, a couple months or just having a safe place to put some cash. It's a thesis-based investment. And so I think one of the things that comes up for me is if I continue to go with a more thesis-based approach where I'm saying, okay, I believe in this, and the reason I believe in this is because what I'm seeing in the AI industry as a firsthand observer, sometimes, it's a longer time horizon and it means that capital is going to be tied up. And so, I'm trying to figure out, you know, outside of the methods that we've already talked about, what are the best ways to kind of maintain operating liquidity while also optimizing for longer term bets. You know, for example, right now, I have some cash sitting in my savings account, and I did that because I need to be able to have some access to liquidity, but it's probably not the best place for that cash to just be sitting.
Ara: Yeah, I mean, it's, it's a great question, and a lot of founders and just, you know, regular clients are dealing with this all the time. The question becomes, should I use my assets, liquidate a position, pay a capital gains tax, and create cash? Or, should I use those assets as collateral for a line of credit? And we really have to kind of assess what you're invested in, and what your goals are, and your risk tolerance, because to borrow is not for everybody. But when it is something that you're open to, it can really be an amazing tool to help you utilize some of that cash for other investments that might be yielding higher than what your cost to borrow is. So, if we look at something like the helium trade, right? We really like the helium trade as part of this kind of futuristic thesis around manufacturing, around space, around data centers, around quantum computing. And so, all of these ideas that we have talked about before, when you wanna deploy capital, it's best to use perhaps the cash in your account that is probably earning maybe 3% in a savings account if it's high yield, and putting that to work. And then, we can use those assets as collateral, and use that line of credit. If we have, and I'll just give a, a hypothetical, if we have a million dollars in a position that's, you know, a diversified portfolio, Morgan Stanley might look at that and say, "Okay, you can borrow 60 to 80% of the value depending on what's in there." And now, all of a sudden, you have, let's call it $600,000 that can be used and wired to your operating account the next day for your business. And so, this is a really great way to essentially bet on yourself, bet on your investments, and borrow instead of having to let that cash sit, or use it for those operating expenses themselves, and then kinda leaving you a little bit cash poor at some point.
Kelsey: Mm-hmm. For me, personally right now, I have just under six figures basically sitting in a savings account. I've got a list of gold stocks that I'm interested in. And I've got an additional, you know, a very budding position, but it is there nonetheless, in the helium space. And I am interested to basically decide, okay, how much capital, even if it's small, am I putting into these various gold positions. And then, as it relates to the helium purchase, like, there is a timeline for what I think is gonna happen, you know, from the outside on this company, but I am looking at a variety of different factors. If I want to increase my position in helium, up to what point and by what date or what price ceiling should I be looking at and why? Because I still think it's a valuable investment, but, you know, how do I get into a dialogue around the ongoing evaluation of a choice that I'm desiring to make that may make sense, but you may also have other thoughts around when it's prudent to pull back or, or not keep going.
Ara: Yeah. So, I think the first thing that we wanna consider is, is everything else in the portfolio taken care of? So, in your case, do we have diversified assets that we know are kind of our safety net? Those are just gonna sit, grow, do their thing. And then do we have sufficient liquidity? So, in your case, do we have cash or do we have the option for the Liquidity Access Line so that we have some sort of built-in emergency fund? Because the situation that arises is when we invest in some of these, I'll just call them trades, some of these trades, we just don't know what's gonna happen. And so, I don't want to call it a bet, but we are essentially, we're betting on helium, right? So, we want to just make sure that if that bet were to not go the direction you want it to go, can we still accomplish all the goals that we have and live the same life that we have? And that's kind of how we assess that in terms of your question around, like, how much should I be putting where? And I'm just gonna use random numbers, but let's just say our result is, okay, we feel comfortable investing $500,000 into this, um, kind of sleeve of our portfolio, which we might just call our kind of commodities and energy opportunistic sleeve. And within that, we would then have kind of a thought collaboration around what you're thinking, and then what Morgan Stanley are thinking in these sectors. But we would be looking at it both from the equity side and from the alternative investment side. So, when I say alternative investments, I mean things that are not necessarily traded on the regular market. They might be private equity-based. They might be private credit-based or even real estate-based, depending on what we're looking for. And so, we would want to utilize the full breadth of the firm to accomplish your goal of exposure in those particular places.
Kelsey: That makes sense.
Ara: Now, with gold, gold is interesting, because gold has been on this tear over the past, not necessarily this year, but last year, gold and commodities really took off. And so, investors usually look at gold as an inflation hedge. They flock there during uncertainty. I have clients that have bought physical gold bars and, you know, will literally go down to the Diamond District and pick up gold bars and put them under their mattress. I am not exaggerating. But, you can also buy a gold ETF or investment in the market. And then we also have alternative investments where they're more commodities-based. So, we can add the sleeve. I think the question for you is more how much should we be doing depending on your overall picture. And we don't wanna overdo it, is really what I would say, in these categories, because we are having more of a risk-reward conversation. And we just wanna make sure that the rest of the portfolio is gonna be there in the case that things start to drop. And you've experienced this having had a concentrated stock, right? We have to, you know, manage that in a different way than we would, uh, a traditional equity diversified portfolio.
Kelsey: Mm-hmm. Definitely, and I think that, you know, there will be things in the future as an entrepreneur you anticipate and believe that you're going in the right direction. But still maintaining some sense of groundedness is certainly a critical element. It's, in fact, the same reason why when I ask for transfers from my Morgan Stanley account to my sort of operating cash account, I haven't just hooked up my own wire transfer from my Morgan Stanley account, and that is as a check and balance on my own self.
Ara: Just gonna say that, checks and balances. Totally.
Kelsey: And it's not just a quick thing to be able to just wire yourself some capital, or make a big transfer. And I think that's been very helpful for me as a person who maybe isn't as close to managing all of my personal finances as you say, comparatively to managing my company's finances. And, and, and that's really the vehicle that I see that will continue to hydrate my personal finances over time. But from the concentrated stock position, I do feel like I wonder to myself, what is the best way to stay in the loop and ahead on what fluctuations might be coming down the way? I know that we're dealing with macroeconomic factors. We're dealing with sociopolitical factors. And I think one of the things that I found really helpful was the opportunity to take out some of that capital and put it into the diversified fund. Do you see that there's gonna be more opportunities like that? What are other ways of diversifying beyond selling and incurring the capital gains tax? Instead, to move it around a little bit, and any creative methods I would be interested to understand.
Ara: Yes. I love this question, because I'm having this conversation all the time about how do I minimize my tax bill and accomplish the goal of diversification? And that's just like the probably billion-dollar question. So, when we have a concentrated position, I like to utilize something called the HOPES framework, and HOPES stands for Hold, Options, Philanthropy, Exchange Fund, Sales, H-O-P-E-S. Now, the H, you've already done that. You've been doing that. And it has done you well. So, holding stock is something that, for many clients, creates wealth. Concentration builds wealth, and we like to say that diversification can preserve it. So, now that we've built our wealth, we might look at the next part of the strategy, which is O, which stands for options, where we can buy puts to reduce volatility. We can sell covered calls, which help to generate income without having to sell off your position. In some cases, we use something called a prepaid forward, which allows you to access liquidity upfront. And so there's a lot of different option strategies that we utilize that can help you accomplish some of these goals that you might have without either generating a big tax bill, or if you're someone who doesn't really wanna sell, but you wanna capitalize on the position in some way, this is another solution.
Kelsey: That makes sense.
Jamie: Options can get really complicated, and they're not for everyone, and there's important things to consider. But, for the right investor, they can give you ways to manage your concentrated stock risk. Buying a put option works like insurance, setting a price floor if the stock price declines beyond that floor. Selling a covered call brings in extra income. You collect cash today by agreeing to sell your stock if it rises to a set target, though it caps your upside and won't save you from a price decline. If you need liquidity now, a prepaid forward gives you upfront cash today for shares you'll deliver in the future, locking in protection while deferring taxes. Bottom line, there's a way to manage risk without having to sell. Options… give you options.
Kelsey: In hearing about the HOPES framework, I think that a lot of what I'm interested in here is in the option trading space. I know that it requires a lot more time and, and focus, but, if we were to say, hey, we want to target some income amount or some amount as a function of options trading, would you even suggest that to be appropriate for my position as I am right now?
Ara: Yeah. I, I actually totally agree. I think that's kind of the next lever that we would pull on the HOPES strategy. I do think that options would be very interesting, especially because you're not active at the company. One thing that usually restricts us from utilizing options is we're not able to do them when you're an active participant. But when you're no longer at the company, or in your case, you know, had a different way of acquiring the equity, then we absolutely can look into it. So, the reason that we would use options is to reduce risk, generate income, or strategically liquidate, and I, I think that actually all three would apply to you at this moment. Um, but it's usually by using one of our third-party managers on our platform to have a systematic managed option strategy. Instead of me calling you up every day and trying to roll a call, or buy a put, or close an option out, we use professionals to essentially say, "Okay, of your position, we're gonna use 10% of it or 20%," or whatever the minimum requirement is for that manager, and put it into this options strategy. And again, depending on if we wanna generate income or reduce risk or both, that can just be income that you're taking, or it can be reinvested into something else. So yeah, would definitely look at that, and that would be a proposal that we can put together for you and just kinda show you, okay, this is how it works operationally, because while it's complicated, I would say that, you know, you're a sophisticated investor, you're a qualified purchaser, you definitely have the ability to have this as part of your portfolio. So I think that would definitely be our next step.
Kelsey: Mm-hmm.
Jamie: Now, Ara explained the parts of the HOPES framework that suited Kelsey's financial situation best. But, to catch you up, the P is planned giving, where you donate your stock to charity. This helps you with your philanthropic goals and comes with some tax advantages. The E is an exchange fund, which we explained earlier. And to hear how it works in practice, don't miss our upcoming episode where our guest uses an exchange fund to diversify their concentrated stock. And the S is selling, using strategies like tax loss harvesting and spreading your sales over a few years to keep yourself in a lower tax bracket. For a deeper dive on all these concentrated stock strategies, stay tuned for a special episode coming soon.
Okay, back to Kelsey.
Kelsey: You know, I think that we haven't actually had this discussion yet, but it's something that keeps arising for me personally, and that is, when I start to think about the legacy planning, the trust planning for my daughter, how do you get started setting up the legacy framework for a new child?
Ara: Yeah, it's a question that we answer almost daily. There's no right answer, but I'll tell you what the options are and then probably what I would recommend. So, the first choice that you have is to set up what's called a custodial account, and a custodial account essentially means that you, as the owner, are the investor. You are the one that picks the investments. You fund the account, but it is for the benefit of your daughter. And ultimately, when she reaches a certain age, which every state has a different age of majority, but let's just say that the age of majority is twenty-three years old in this case. When she reaches age twenty-three, that money is hers. You no longer have a say in the investments or the use of those funds. As you can imagine, there are pros and cons to this particular solution. And I have had this happen, where parents didn't really realize that–
Kelsey: I'm sure.
Ara: They come to us and they're like, "Wait, I don't want them to have that account." And I'm like, "I'm so sorry," like, the, the law is the law, right?
Kelsey: Legally, you have done this.
Ara: So, in a perfect world, you and your family's financial advisor have done financial education with your daughter over time, so that if that were to be the case, she's educated and feels confident in making good money decisions. You then might have a 529 account or a college education savings account. Now, this account is limited in the sense that the funds technically are to be used for qualified education expenses, and the benefit of that account is really that the funds are gonna grow tax-free if used for qualified education expenses. And so, a lot of folks don't necessarily like these accounts because they are pretty restrictive in the way that you use the funds. However, they do give you that tax benefit. So I'm usually in the camp of, if you think they're gonna probably go to college or you want them to go to college, fund it, but don't overfund it. There are some things that have changed in the tax code over time that have now allowed us to convert a portion of the account to a Roth IRA for her if not all the funds are used. So, I think things are evolving in the way that we can use the funds, but it is another account that is really serving one purpose. Now, the third one, which you alluded to, is setting up a trust. So, the trust is a really great option because it gives you as the parent the most control. So, you can say in the trust terms, "I would like to fund this account, and I only want to fund it with, um, X amount of dollars that can only be used for certain purposes." So, usually folks use them for health, education, maintenance, anything that is kind of serving a greater good for your child's life. So I've had parents set up trusts where they'll fund it and say, "Okay, my daughter can only use this to start her own business," or, "My daughter can only use this to buy their first house," or, "They can only use it to, you know, if they have a medical emergency." So the trust is really good in that it can really outline what you want to happen with the funds, and then you can maintain your role as the grantor and the trustee from an investment standpoint and kinda control what happens over time.
Kelsey: Yes, that makes sense. It was great to chat about these things. I would love to follow up on the option strategy that we can start to deploy. I know that, you know, even three months ago, even six months ago, I don't think we would be having that exact conversation. So, I feel excited about this next step, and it was a pleasure to get to chat today.
Ara: Yeah, absolutely. So fun chatting with you, as always. And I think we have some really good action items based on today's conversation. So, of course, like you mentioned, the option strategies that we can explore to manage your concentrated stock, and then I also think we should set up time with Morgan Stanley Family Office Resources to have the conversation around trust and estate planning for your family. Those are two immediate next steps we can take, and then, of course, we'll continue to keep in touch on everything else related to your accounts.
Kelsey: Thank you. See you soon.
Jamie: If you'd like a deeper dive on concentrated stock strategies, alternative investments, legacy planning, or if you're interested in having a financial plan done for you, come see us at morganstanley.com/mymoney. I'm Jamie Roô. Talk to you soon.
DISCLAIMER: This material has been prepared for general reference and educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Please see our show notes for a full disclaimer on the information provided.
This material has been prepared for general informational and educational purposes only. It does not constitute an offer to buy or sell, or a solicitation of any offer to buy or sell, any security, financial instrument, investment product or strategy. The information presented is not intended to provide individually tailored investment advice and has been prepared without regard to the individual financial circumstances, objectives, risk tolerance or needs of any specific person.
The guest speaker featured in this material is a client of Morgan Stanley and was not compensated for participating. The client’s statements reflect her own personal experiences and opinions. Her experiences are not representative of all client experiences, may not be duplicated, and are not a guarantee of future results or success. Morgan Stanley may or may not agree with the views expressed by the guest speaker.
Any testimonials, endorsements, opinions or client experiences described herein should not be construed as a recommendation or solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment product, strategy or service. Past experiences and outcomes are not indicative of future results. Results will vary based on each client’s particular circumstances.
The views and opinions expressed by any speaker are those of the speaker as of the date of recording and are subject to change without notice. Morgan Stanley has no obligation to update this material or notify recipients if any information, opinion, forecast or estimate changes or becomes inaccurate.
The transcript includes discussion of concentrated stock positions, diversification strategies, exchange funds, options strategies, securities-based lending, commodities, gold-related investments, helium-related investment themes, alternative investments, custodial accounts, 529 education savings plans, trusts and estate planning concepts. These topics involve important risks and considerations and may not be appropriate for all investors.
Diversification does not guarantee a profit or protect against loss in a declining market. Strategies designed to manage concentrated stock positions, including holding, selling, hedging, options strategies, exchange funds, philanthropy and prepaid forward contracts, may involve significant risks, costs, tax consequences, restrictions and eligibility requirements. There can be no assurance that any such strategy will achieve its intended objective.
Options are not appropriate for all investors. Options strategies may involve substantial risk and may result in losses, including the potential loss of the entire investment. Certain options strategies may also limit upside participation, generate taxable events, involve complex terms and require ongoing monitoring. Investors should understand the risks and characteristics of options before engaging in any options strategy.
Securities-based lending, including Morgan Stanley’s Liquidity Access Line, may not be suitable for all clients. Borrowing against securities involves risks, including the potential for a collateral call, the need to deposit additional collateral or repay part or all of the loan, and the possibility that securities may be sold without prior notice to meet collateral requirements. Interest rates and collateral requirements may change, and a decline in the value of pledged securities could result in adverse consequences. Proceeds from securities-based loans generally may not be used to purchase, trade or carry margin stock or repay margin debt.
Alternative investments, including private equity, private credit, real estate-related strategies, commodities-related strategies and other nontraditional investments, are speculative, involve a high degree of risk and are suitable only for qualified investors who can bear the risk of loss.
Alternative investments may be illiquid, may have limited transparency, may involve leverage, may be subject to transfer restrictions, may have higher fees than traditional investments and may not be required to provide periodic pricing or valuation information.
Commodity-related investments, including gold and helium-related investments, may be highly volatile and can be affected by changes in supply and demand, geopolitical events, interest rates, inflation expectations, currency movements, regulatory developments, technological changes and other market factors. Investments tied to a particular commodity, sector or investment theme may be subject to greater risk and volatility than a more diversified investment.
References to specific companies, investment themes, industries, technologies or sectors, including artificial intelligence, data centers, quantum computing, manufacturing, space, gold, helium, Mother.tech or Google Ventures, are for illustrative and educational purposes only and should not be viewed as a recommendation, endorsement or investment advice. Morgan Stanley and its affiliates may provide or seek to provide services to companies or entities mentioned and may have other business relationships or interests involving such companies or entities.
Any hypothetical examples discussed are for illustrative purposes only and do not reflect actual client results, loan terms, investment performance or Morgan Stanley recommendations. Actual borrowing availability, collateral requirements, interest rates, investment results, tax consequences and suitability determinations will vary based on client circumstances, market conditions and applicable program terms.
Tax laws are complex and subject to change. Morgan Stanley, its affiliates, Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. Clients should consult their own tax and legal advisors regarding the tax and legal implications of any investment, lending, estate planning, trust, custodial account, 529 plan, charitable giving or wealth transfer strategy.
Custodial accounts and 529 education savings plans are subject to specific rules, limitations and restrictions. Custodial account assets generally become the property of the minor at the applicable age of majority or termination under state law. 529 plan assets used for nonqualified expenses may be subject to taxes and penalties. The availability and treatment of any 529-to-Roth IRA transfer or rollover is subject to applicable law, eligibility requirements and limitations.
Trusts and estate planning strategies should be reviewed with qualified legal and tax advisors. The appropriateness of any trust structure depends on the client’s objectives, family circumstances, state law, tax considerations, funding decisions and administrative requirements. Morgan Stanley does not draft legal documents or provide legal advice.
Morgan Stanley Smith Barney LLC, its affiliates, and Morgan Stanley Financial Advisors or Private Wealth Advisors do not guarantee any investment outcome, income generation, liquidity event, tax result, estate planning result or financial planning result. All investing involves risk, including the possible loss of principal.
Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, Member SIPC, and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC and its affiliates may act in various capacities, including as broker-dealer, investment adviser, lender or distributor, and may receive compensation in connection with products and services discussed.
Clients should carefully review all offering documents, account agreements, risk disclosures, loan documents and program materials before entering into any investment, lending or planning strategy. Clients should also consult with their Morgan Stanley Financial Advisor or Private Wealth Advisor to determine whether any strategy is appropriate for their individual financial situation, objectives and risk tolerance.
The conversation in this podcast is solely intended as a case study between a client/prospective client with a Financial Advisor and is not intended to serve as individualized investment or financial advice. No portion should be construed as a recommendation to employ any of the guidance contained within this podcast. Each investor has their own unique facts and circumstances and must determine what is appropriate for their own situation. Participants in this podcast are not compensated and are not affiliated with Morgan Stanley.
This material has been prepared for educational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.
Important information about your relationship with your Financial Advisor and Morgan Stanley Smith Barney LLC when using a Financial Planning tool. When your Financial Advisor prepares a Financial Plan, they will be acting in an investment advisory capacity with respect to the delivery of your Financial Plan. To understand the differences between brokerage and advisory relationships, you should consult your Financial Advisor, or review our Understanding Your Brokerage and Investment Advisory Relationships brochure available at https://www.morganstanley.com/wealth-relationshipwithms/pdfs/understandingyourrelationship.pdf
© 2026 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC# 5865766 (10/2026)
