Equity Compensation Diversification Articles to Help Advisors
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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There are a variety of ways to calculate the Full Option Value (FOV) of employee stock options. The two most popular and relevant methodologies are Black-Scholes Merton and Baroni-Adesi Whaley. Detailed white papers on these methodologies can be found at the previous links, but the objective of this article is to simplify these complex formulas and explain the differences. .StockOpter.com can use either of these methodologies to calculate Full Option Value and Time Value. To change the methodology used by...
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IMAGE: iqoncept, 123rf.com Net Worth Strategies has been providing financial advisors with employee stock option risk analysis and tax planning tools since 1999 so it has witnessed firsthand a great deal of the development in employee stock option education. Here's a brief synopsis.... The internet bubble (1995 - 2000) instigated many companies to begin offering broad-based stock option programs. These companies had to provide participants with basic information about their stock option grants because options were new and mysterious. This...
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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...
MoreThis 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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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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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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This infographic can be used to promote professional equity compensation guidance to clients and prospects that receive company stock and options. These five concepts are included in the StockOpter.com client deliverables. They have proven to be very effective at engaging stock plan recipients and helping them to make timely, informed and profitable decisions. These concepts are not illustrated on stock plan participant portals or using general financial planning tools. Click on the image below to view and print this infographic....
MoreRecently, Fidelity Stock Plan Services and ClearBridge Compensation Group assessed the alignment between Performance Awards and a company’s performance. Accessing data and researching deep into company grant practices and Performance Award payouts, they specifically looked for factors which impacted the pay‑for‑performance relationship to help determine whether or not an ideal mix of equity vehicles exists. For this study, ClearBridge analyzed Performance Award Data collected from Fidelity Stock Plan Services for two hundred Fidelity clients with share-based Performance Awards that had...
MoreStockOpter.com and StockOpter Pro are widely acclaimed as the best equity compensation diversification tools in the financial advisory industry. Although they are COMPLETELY different, both are designed to help clients that receive company stock and option grants make profitable diversification decisions. The following descriptions explain how StockOpter.com and StockOpter Pro differ. StockOpter.com: Equity Compensation Risk Analysis & Tracking A web based platform that provides guidance on when to exercise employee stock options and diversifying company stock positions based on risk. StockOpter.com is the...
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