Equity Compensation Diversification News
By Jill Addison You’ve chosen to focus on corporate executive clients as a niche in your financial advisory practice. Great! But here’s the biggest mistake so many advisors make: they don’t put this niche focus and specialty front and center in their marketing. Having a niche is one of the biggest keys to growing a successful practice. But if no one knows about your niche, the power of it is lost. That’s where marketing comes in. You must platform your...
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Financial advisors contact me regularly to ask for ideas on how to grow their practices by acquiring corporate executive clients. Having been in the equity compensation guidance space for 20 years I've seen what works and what doesn't. Here are some do's and don'ts for pursuing this market: Do have a few questions and an elevator pitch memorized for whenever you meet an executive that receives equity compensation (i.e. employee stock options and restricted stock/units). Read this article on the Four Questions to Ask...
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Employees with equity compensation represent a great opportunity for advisors to generate new and ongoing business. This is because the market is largely under served and highly lucrative. Of the approximately 8+ million employees who receive equity compensation awards, only a small percentage utilize professional assistance. So when financial advisors cross paths with these prospects it's important to be prepared to seize the opportunity. Here are 4 questions to ask after meeting someone who works for a company that provides equity compensation: "What type(s) of...
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According to the NASPP, Incentive Stock Options (ISOs) are now rarely granted to employees of publicly traded companies, yet they are still popular with pre-IPO private companies. Consequently, advisors may encounter clients or prospects with ISOs that want to take advantage of the lower Alternative Minimum Tax (AMT) tax rates on these grants and optimizing for tax efficiency. Financial advisors often turn to us for an easy way to deal with Incentive Stock Options. Unfortunately, there is no simple way...
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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...
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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: 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...
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...
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