Concentrated Stock Strategies

BALANCING THE REWARDS AND RISKS OF OWNING A LARGE AMOUNT OF EQUITY IN A SINGLE COMPANY. GETTING CHOICE AND CONTROL OVER WHEN AND HOW MUCH TO PAY IN TAXES.

“I need a plan to minimize the tax impact of my concentrated equity position.”

Benefits of a Concentrated Equity Strategy

Owners usually want to know how to achieve three things.

Less Risk

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Less risk

Unwinding a large stock position to reduce the risk.

Lower Taxes

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Lower Taxes

More choice and control over taxes.

Confidence

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Confidence

Ability to maintain your unique lifestyle.

Concentrated Equity Owners are Often of Two Minds

How much risk is right for me?
It is most important to provide financial

Safety

You may have built your wealth by owning shares in a single company. But, as time passes, you want a plan to minimize taxes, reduce these risks and still have a chance at significant growth.

Red tie feeling happy
Concentrated Equity Ownership Strategies
Yet I know this may be a great financial

Opportunity

On the other hand, you may feel confident in the growth prospects for your company. We can help with strategies to give an owner upside potential and still maintain some control over taxes and other risks.

Some benefits of a concentrated portfolio strategy:

Reduce the Risk through Diversification

Single equities are volatile. By owning multiple companies, the risk of a single equity is reduced substantially. Research shows, you can achieve significant risk reduction by owning as few as 16 different companies.*

For owners of concentrated stock, we take a completely customized approach. We find equities that move differently than the company you own. We want low correlation. As share prices move around, we optimize the portfolio for your real-life financial plan.

*Sources verified March, 2024.

Get More Choice and Control over Taxes

With a concentrated equity position, taxes are often a big obstacle to selling and becoming more diverse, and safe. Taxes can eat up a lot of the pie!

To overcome this challenge, we use tax harvesting. As time goes by, some of the equties will experience a temporary loss. We can capture that loss for tax purposes. Then, sell some of the concentrated equity without a taxable gain. As the concentrated equity position moves around in price, we can follow a similar process and reduce the tax burden.

Owners of concentrated equity can experience more choice and control over when, and how much, to pay in taxes. Working within your personal financial plan, you can take advantage of life events to realize gains opportunistically, and reduce your overall lifetime tax burden.

Gain Confidence to Maintain the Right Amount of Concentrated Equity

A successful investment in a concentrated equity position can be a life-changing financial decision for you and your family. We proceed with two absolute truths:

1. First, we want you and your family to be financially safe.
2. Second, after your financial plan is secure, we want you to have the confidence to become even more wealthy.

We often say that we would like to see at least as much money outside of your company as you have inside the company—just in case something happens it doesn’t completely wipe you out. For some people, this may be difficult because of the amount of wealth inside the single stock is so great. It still remains a good long-term, real-life goal. And if we get enough money outside the company to keep you and your family safe, then you may choose to take the risk of keeping the rest in the concentrated position. Your financial plan and planner provide you the confidence to possibly become very wealthy.

For some people, half of your wealth outside the concentrated equity position may still be too much risk. This is completely understandable—and normal. As a company grows, the influence of a single person declines, and so does our control and ability to affect the outcome. So it is natural to want to reduce that risk as we age. In these situations, we continue the diversification and tax mitigation strategies discussed elsewhere for many years—perhaps the entirety of your life.

Self-help Resources

Videos, podcasts, white papers and more for owners of concentrated equity
To learn more about concentrated equity strategies

Listen to a podcast

Episode 16: Concentrated Equity Strategies 1 of 2

Karl Frank and Nathan Merrill discuss what to do when a large amount of your net worth is tied up in a single company’s stock. This is called having concentrated equity. Learn investment and tax strategies to reduce the tax-load and increase the after-tax money you have. Learn about costs, complexity and safety for different strategies. Learn about two different types of charitable trust strategies. For the newly-minted wealthy, these decisions are complicated and important.

Episode 17: Concentrated Equity Strategies 2 of 2

Karl Frank and Nathan Merrill discuss practical plans for owners of stock options, restricted stock and other types of concentrated equity. Learn three big rules for owners of concentrated equity, and Karl’s favorite “go tax free” idea for owners of concentrated equity. Other ideas include nonqualified deferred compensation, employee stock purchase plans, net unrealized appreciation and more. Learn the first thing and most important to do when you receive a concentrated equity plan. We also discuss how to build a secure financial plan if you are going to keep a large amount of money in the equity of a single company. Know that you are in good company. Many people have struggled with the same issues!

 

To learn more about concentrated equity strategies

Watch a video

To learn more about concentrated equity strategies

Download a white paper

Client Stories

Client stories included on this website reflect hypothetical client situations that represent
those commonly encountered by AIWM representatives, they do not reflect actual client relationships.
Executive with Concentrated Equity

Edward is an executive whose technology company went public. He has 100% confidence in his company’s ability to grow quickly and wants to maximize his returns. But he also wants to protect his family’s financial security and not put them at risk by keeping too much with his employer. He has stock options, restricted stock units and owns stock outright in his ESPP (Employee Stock Purchase Plan). He has college to plan for, a new mountain vacation home to finish and to furnish, and charities, including his church, he would love to support.

We:
Created a list of action items
Set priorities
Established a “safety first” financial plan
Prioritized and minimized tax and other costs with the various concentrated equity positions
Calculated how much equity he could keep with his employer, giving him the chance for substantially even more wealth while keeping his family safe.
Ongoing investment management

Edward says, “You are a great listener and make it easy for me to understand my options.” His successful outcome is more than financial, it is an emotional win for him and his family. Plus, he has the freedom to pursue his passion for the outdoors.

Services We Provide

Retirement Planning

Our financial planner works with you to envision what you will retire into, what your days may look like, and how your finances will change during your retirement years.
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Comprehensive resources for college planning. Our college planning process, videos, podcasts and free college money report.
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Business Succession Planning

Grow & protect your business & transfer it the way you want & for the price you want.
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Wealth Transfer Planning

Be sure your financial assets, values, stories and more transfer to the people and causes you care about. Minimize taxes and other costs.
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Real Estate Planning

We deliver advanced financial planning with our independent expert team.
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Elder Planning

An elder plan helps you live purposefully when you need other people's help.
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Paying for weddings

Weddings can be one of the greatest joys of parenting, and they can also be expensive!
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More resources

If you have a large equity position

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