Too Much Stock? | Decision Making

Concentrated Stock Positions

By Matthew McDaniel

One of our clients came to us with a common problem: too much employer stock in their portfolio. Nearly 15% of their net worth was tied up in a single company and most of it had appreciated significantly. I thought it would be helpful to share how we walked through our conversation.

Variables we had to identify:

• Vesting schedules—When can you exercise your shares?
• Tax brackets—How much can you sell without triggering a higher bracket
• Liquidity needs—What kind of large investments do you have in the next 1-3 years?
• Retirement savings—Should this be invested to accelerate your financial independence?

A few principles for anyone who isn’t sure what to do about a concentrated employer stock position:

• Assess tax impacts.
• Build a strategy—before you start selling.
• Increase communication and collaboration with your CPA and advisor.
• Prioritize older, high-gain grants.
• Use proceeds to build a stronger, more diversified base.

This is what equity planning looks like when it’s actually integrated. If you’re sitting on a large company stock position, the question isn’t just “what’s it worth?” It’s “how do I turn this into a long-term advantage without unnecessary waste?”

MAG7 leadership is back:

Decision Fatigue?: Studies estimate an adult makes 35,000 decisions per day. As year-end draws near, what decisions are you making and how might they impact your taxes?  Invite us into the conversation and the process. Invite us in before you make a decision.

We can help if you are considering:

• Leaving a job
• Selling a property
• Taking a distribution or a loan from a retirement account
• Cancelling a life insurance or long-term care insurance policy
• Pension elections
• Exercising stock options
• Retiring
• Starting Social Security
• Getting divorced or married
• Selling stock from your ESPP

Worth Considering: “Anyone who invests in the new thing must first answer two questions: First, how much value will this innovation create?  And second, who will capture it?”  An intriguing and thoughtful perspective about the intersection of investing and AI. Essay here.

Quote of the week:  “Ladies and gentlemen, we must admit that crypto’s time has come.”  —Paul Atkins, SEC Chair

Art Update: We took some time to update the art in our office space in the last few weeks. Using an inspiring, local non-profit, Fresh Artists, our walls are now adorned with largely Philly inspired artwork from students in our area from local public schools. Take a look around next time you’re in!

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, an investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website here. Past performance is not a guarantee of future results.