Why equity comp needs its own strategy
Equity compensation comes in several forms — incentive stock options, non-qualified stock options, restricted stock units, employee stock purchase plans — and each one has its own tax rules, vesting schedule, and expiration clock. The common thread is that all of them create a concentrated position in a single company, and all of them force a set of decisions that most employees are not trained to make.
The risk is not that the stock goes down. The risk is that the stock is also the source of the paycheck, the health insurance, and the retirement contributions. A bad quarter at the company doesn't just reduce the portfolio — it threatens the income, the benefits, and the equity at the same time. That kind of correlation is the definition of concentration risk, and it is invisible until it isn't.
A real equity comp strategy starts by separating the emotional attachment to the company from the financial math. The company may be wonderful. The stock may go higher. Neither of those facts changes the principle that no household should have eighty percent of its net worth tied to a single outcome it cannot control.
What working with us looks like
First meeting — mapping every grant and lot
We meet in person and walk through every grant notice, vesting schedule, and brokerage statement. We build a picture of the total concentration, the tax lots, the expiration dates, and the household's marginal bracket. Most employees have never seen all of this in one place.
A written exercise-and-diversification plan
You get a written plan that covers which shares to sell first, what exercise timing minimizes the tax, how to avoid the AMT trap on ISOs, and what the diversified portfolio should look like on the other side. The plan is yours to keep whether or not you hire us.
A note on fit
When this might not be right for you
Equity compensation strategy as a focused engagement is not the right fit for everyone. Some honest disqualifiers:
- Employees whose equity comp is a small fraction of their total compensation and net worth. The complexity of the strategy has to be proportional to the dollars at stake.
- Anyone who is unwilling to sell any shares under any circumstance. A strategy requires the possibility of acting on it.
- Employees at pre-IPO companies with no liquid market for the shares. We can model scenarios, but a real exercise-and-sell strategy requires a public or secondary market.
Frequently asked questions
What is the difference between ISOs and NSOs?
Incentive stock options receive preferential tax treatment — no regular income tax at exercise — but they carry alternative minimum tax risk and require a specific holding period to qualify for long-term capital gains rates. Non-qualified stock options are taxed as ordinary income on the spread at exercise, with no AMT complications. The right choice between the two depends on your bracket, your AMT exposure, and how long you can afford to hold the shares.
When should I exercise my stock options?
The answer depends on the option type, your current and projected tax bracket, the stock price relative to the strike price, and how long until expiration. For ISOs, exercising early in a low-income year can minimize AMT impact. For NSOs, exercising when your bracket is lower reduces the ordinary income hit. We model the tax cost under multiple scenarios before recommending a timing strategy.
How do RSUs get taxed?
Restricted stock units are taxed as ordinary income on the full fair market value at the time they vest. Your employer typically withholds shares to cover the tax, but the default withholding rate is often lower than your actual marginal rate, which can create a surprise tax bill in April. Any gain above the vest price is taxed as a capital gain when you sell.
What is the ISO AMT trap?
When you exercise incentive stock options, the spread between the strike price and the market price is an adjustment for the alternative minimum tax. If you exercise too many ISOs in a single year, you can trigger an AMT bill that arrives with no corresponding cash — because you exercised the options but didn't sell the shares. The fix is modeling the AMT threshold before exercising and spreading exercises across tax years.
How much of my net worth should be in company stock?
There is no universal number, but most financial planning literature suggests keeping any single stock below ten to fifteen percent of liquid net worth. Beyond that, the concentration risk — where the stock, the paycheck, the benefits, and the retirement all depend on the same company — becomes an outsized bet that no diversified plan would endorse.
Should I hold company stock or sell and diversify?
In most cases, a scheduled diversification plan is the right answer. Selling a fixed percentage of vested shares each quarter and reinvesting into a diversified portfolio removes the timing decision and steadily reduces concentration. The emotional pull to hold is real, but the math almost always favors diversifying on a schedule rather than waiting for a price target that may or may not arrive.