If you’re a financial advisor with clients or prospects that receive stock options from their employers, it can be like falling into a well and finding a bag of money at the bottom. These individuals represent a fantastic long-term business opportunity; but there’s a catch, you need to be able to help them determine “why” and “when” they should exercise, sell and diversify. Here's 3 quick lessons on what advisors need to explain to their clients to make timely and...
MoreInsight Ratio: The Stock Option Exercise Secret
Determining the right time to exercise and sell one's employee stock options is the key to maximizing the value of this benefit. Stock options are granted at a fixed grant price that must be exercised after vesting and prior to the expiration date to realize their value. During the time between vesting and expiration (usually 10 years after the grant date) the current stock price for publicly traded companies will generally fluctuate significantly and no one can predict the peaks...
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Age, Gender, and Stock Plan Participant Attitudes
As one of the first surveys to report statistics by gender as well as age, the recently released biennial Fidelity Stock Plan Services Participant Survey highlights a unique opportunity for advisors to provide equity compensation guidance and education to not one, but two niche groups. Women While 66% of men reported understanding their stock plans “very well,” only 48% of women reported the same. When asked if they were aware of the tax implications of selling the stock in their...
MoreMaximizing Restricted Stock Awards
Financial advisor and StockOpter user Megan Gorman in her Forbes article How A Restricted Stock Strategy Can Maximize Your Wealth has some great tips for restricted stock recipients. Megan explains "Restricted stock is simply shares issued to an employee that cannot be transferred to them until certain conditions have been met. These conditions can be time- or performance-based." However she continues, "while restricted stock creates great upside potential, if employees do not know how to manage the risks, they might...
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Trends in Private Company Stock Plans and How They Effect Advisors
According to a recent post by Barbra Baksa of the National Association of Stock Plan Professionals, a soon to be released NASPP’s survey on equity compensation at private companies found the following five trends: #1: Stock options are the equity vehicle of choice, with 74% of respondents granting them. #2: Private companies are committed to ISOs, with close to 60% of private companies that offer stock options granting them. #3: For most private companies, when deciding whom to grant to,...
MoreMarket Volatility and Employee Stock Option Values
The stock market has been on a roller coaster over the last few months, but in general the S&P 500 index is still near its all time high. Consequently, most employee stock options granted in the last ten years are likely to be significantly "In-the-Money" (current stock price above the grant price) as illustrated by the above chart. This chart shows the S&P 500 over the past decade. It can be used as a general representation of the prices at...
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Modeling Owned and Restricted Share Diversification Scenarios
IMAGE: Natalie Rhea Riggs / Unsplash Advisors and their clients with sizable holdings of employer stock will both benefit from systematic share diversification of these positions. For the client it means reduced risk and peace of mind, and for the advisor it means additional assets under management. Most executives will agree that concentrated company stock positions are risky and diversification is financially prudent, but taking timely action is often a different matter. There are a number of factors that may...
MoreUnderstanding the StockOpter Share Diversification Analysis
This article was updated in January 2019 to reflect functional modifications to the StockOpter.com Share Diversification Analysis. Originally this function compared the value of a client's owned shares to the value of their other investments over a 5 year period. This ignored the value of any vested stock options and subsequently underestimated the overall level of concentration. This updated version of the StockOpter Diversification Analysis factors in option value to illustrate how owned share diversification effects concentrated stock positions. As...
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NQSO No No
IMAGE: Gemma Evans/UnSplash.com Too often I hear from financial advisors that their clients are considering exercising their non-qualified employee stock options (NQSOs) early (i.e. several years prior to expiration) and holding the shares for at least 1 year to get long term capital gains tax rates when they sell the shares. This may seem like a reasonable tax strategy, but it really isn't and here's what clients need to know. Unlike Incentive Stock Options (ISOs), NQSOs are NOT tax advantageous....
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Workers Report They Hold Large Percentages of Company Stock
IMAGE: Andriy Popov /123rf.com A new survey from Schwab Stock Plan Services reveals that equity compensation accounts for a significant portion of participants’ net worth, with many employees’ portfolios having a concentration in company stock. According to the nationwide survey conducted in July 2018 of 1,000 stock plan participants who receive employer stock and options, company equity accounts on average for approximately 30 percent of employees’ net worth. Millennial employees have an even greater share of their net worth in...
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