Junior Exec Photo by Ali Morshedlou on UnsplashIMAGE: Ali Morshedlou / Unsplash

Five Things For Employees to Review Before Year End:  There are certain employee benefit related actions that should be reviewed and possibly changed periodically, if not annually. Richard Friedman from the Ayco Company points out his “top five” year end reminders, which incorporate mistakes he has seen all levels of employees make – from the recently hired employee to long-term senior executives.

Year End Equity Compensation Planning Tips: 

  • Start with a framework for having a year-end discussion with clients by running a StockOpter.com Analysis Report for them. This report analyzes and summarizes their company stock and option holdings and shows important vesting and expiration dates.  It also enables clients to see the “big picture” and will facilitate multi-year planning decisions based on goal attainment and risk reduction.
  • Consider whether option exercises or stock sales could trigger higher tax rates this year or next.  This year-end planning article from myStockOptions.com outlines the top tax rates that were significantly raised by the American Taxpayer Relief and Affordable Care acts.  There is also a free tax calculator at optionexercise.com that provides a quick and easy way to estimate the tax impacts of exercising stock options.
  • Got Incentive Stock Options (ISOs)?  We recommend exercising and holding them in January to start the clock on the 1 year holding period.  This way the client doesn’t have to deal with multiple tax years and there is 12 months to monitor the stock price. If the stock price goes below the exercise price they can sell the underlying stock during the holding period. This is a “disqualifying disposition” and the option proceeds are taxed at ordinary income rates like non-qualified stock options.  For more information regarding ISOs read the Planning Guidelines article on the StockOpter University.

Goal Based Equity Comp. Diversification StrategiesDo you need to model and compare diversification strategies over a multi-year time frame based on client goals such as annual after tax cash flow or diversification percentage?  If so, take a look at StockOpter Pro using the free demo.  The program’s strategy wizards use Excel’s “Goal Seek” function to quickly determine which share and option tranches and how many shares need to be exercised and sold to achieve the client’s cash flow or diversification goals.  StockOpter Pro makes quick work of illustrating complex diversification plans such as 10b5-1s for high net worth executives.  Contact me if you want a quick walk-thru.

New Articles on the StockOpter University: 

TIP – Managing StockOpter.com Alerts: StockOpter Insight Ratio alerts can trigger email notices every weekday.  This redundancy can cause important notifications to be overlooked so here are 3 ways to get your StockOpter alerts under control:

  1. Change frequency from daily to weekly:  From the “My Account” function under the “My Account” menu, uncheck the “Consolidated Alerts” box and check the “Weekly Alerts” box. With this setting you will receive a single email Sunday night with a link to all the alerts that were triggered the previous week.
  2. Lower the threshold: The default Insight Ratio trigger is 15%.  Use this initial “high water” notice to reach out to your client and model future ratios with the “Key Ratios” Dashboard.  Get them to agree to a lower value and then change it by editing the value on the “My Alerts” page under the “Monitoring” menu (the link in the consolidated alert email will take you there).
  3. Delay the alert for a specified number of days: This is handy if the client is in a blackout period.  Use the link in the alert email to go to your “My Alerts” page.  Click the “Edit” link for that client, enter the desired number of “Delay Days” and hit “Update.”  This alert will not be triggered until the days have counted down.

Explaining How VaR Pertains to Company Stock and Options: The Value at Risk (VaR) methodology used by many financial institutions to determine exposure to negative economic events is an excellent means of showing individuals the risk inherent in their company stock (i.e. long shares) and vested options. An understanding of VaR can facilitate diversification decisions, but VaR isn’t easy to explain. Here are two resources on the StockOpter University that can help with that: VaR Video & VaR White Paper.

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