Employer Stock: When it's time to ask for help (3 min read)

| September 20, 2018
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They say money doesn't come with instructions, and the same can be said about your equity compensation program. 

Your company may explain the mechanics of exercising stock options, what happens when restricted stock vests, or how to participate in your employee stock purchase plan (ESPP). 

But they will not tell you when to exercise, how long to hold the stock, or the myriad of tax considerations that should be assessed and understood before doing anything.

Ultimately, it is up to you, alone or with the help of outside advisors, to select and execute a strategy that is right for you.

A recent Charles Schwab survey of 1,000 equity compensation participants indicates that the majority are hesitant to exercise options or sell shares:

  • 76% have never exercised or sold their equity compensation or ESPP shares.
  • 48% are concerned they will make a mistake when they decide to exercise or sell.   
  • 34% admit to being worried about potential tax implications of making a wrong decision.

Perhaps the most compelling statistic:  80% of participants indicated they would be "extremely confident" or "very confident" in making equity compensation decisions with the help of a financial advisor who specializes in equity compensation planning.

Source:  Schwab Stock Plan Services, Inc.  2018 Equity Plan Participant Survey. https://www.aboutschwab.com/images/uploads/inline/Stock_Plan_Services_Survey_results.pdf

Why might you consider working with an equity compensation specialist?

1.  You are concerned about when to exercise or sell company shares.  Over time, equity compensation programs may become a significant part of your net worth.   Studies have shown that senior management often has 80% or more of their net worth tied up in company stock. Over concentration can lead to missed opportunities at best, or disastrous consequences at worst.

2.  You would like to avoid unpleasant tax surprises. Tax considerations surrounding company stock options, restricted stock and ESPPs are highly complex.  Many participants leave money on the table by exercising their options without considering the most tax-efficient ways to divest.  Blindly selling stock and overlooking tax implications can lead to major problems that may be avoided with proper planning. 

3.  You would like to optimize stock-based compensation for retirement planning and other accumulation goals.  The ideal strategy for stock compensation begins with an integrated financial plan that incorporates all assets, liabilities and tax considerations, along with a deep analysis of your lifetime cash flow requirements.  In other words, decisions about your stock grants can be optimized only when they are seen in the context of your total current circumstances and reasonable, realistic assumptions for the future.

Would you benefit from a better understanding of the role your equity compensation program can play in your long-term financial security?  Contact us to learn more about how we help people just like you.  

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