If company stock is a piece of your compensation, you may not be utilizing it to your best advantage. I work with smart people every day who are very good at what they do in the corporate world and are compensated with some form of company equity. Many companies, especially in the tech sector, use company stock to keep employees focused on shareholder value. This can be a great motivator—if the price of the stock goes up, everybody with shares of that stock receives the benefit of that increased share price.
So what’s the problem? As a financial advisor, there are some common pitfalls I see: not having a plan in general or specifically for the company stock, unintended tax consequences, missing sell windows, untimely selling, incorrect cost basis, over-concentration, and too much risk, to name a few. People are simply too busy being great at what they do, may have spouses and family to keep up with, or would like to do just about anything else, even a trip to the dentist, before a conversation about money.
What to do? Have a plan. Understand what you have (including quantities and timing), when it vests (becomes yours), any tax considerations and consequences, and how it fits into your overall financial picture. To help guide your plan, layer in your goals and dreams, liquidity needs, charitable gifting, and investment philosophy, coupled with risk tolerance and timing. Fear of the unknown, especially when it comes to financial literacy, may pose a barrier to this effort, but it’s never too late to get started. Let’s start the conversation today.
Heather has been named a Forbes Top Wealth Advisor in 2020. Previous to financial advising, Heather was a Global General Manager at a Fortune 500 company, where stock was a piece of her overall compensation. She has published and been interviewed for her expertise in this area—links for these articles can be found on our website.