Inventory grants, inventory choices, restricted inventory items (RSUs), worker inventory buy plans (ESPPs) and different types of stock-based compensation may help your shoppers construct wealth. It’s vital to have a plan in place to handle these shares for shoppers who profit from one of these compensation.
Inventory-based compensation includes not solely the compensation side but additionally managing the shares your shopper finally receives to successfully maximize their worth. It’s vital to impress upon your shopper that they should cope with these shares as they’d every other part of their funding portfolio. This consists of promoting or divesting shares if it makes good funding sense for them.
There are some recipients of stock-based compensation who really feel that they could be perceived as being disloyal to their employer in the event that they promote the shares. Apart from any restrictions set forth by their employer’s inventory compensation plan, these shares are a part of your shopper’s compensation to do with as they see match.
One of many distinctive danger components with firm inventory is focus danger. That is the danger of holding an outsize place in any single inventory. The danger is even larger if the concentrated place is in an employer’s inventory. Not solely is your shopper uncovered to the danger of a extreme downturn within the shares, but when this downturn is because of points with the corporate, their livelihood could possibly be in danger as nicely.
Shoppers receiving stock-based compensation want your experience and objectivity in advising on the easiest way to make the most of one of these compensation. This will embrace advising them when to promote or in any other case divest themselves of those shares. Taxes will usually come into play when seeking to divest a shopper’s firm shares, and this must be a consideration when recommending a plan of action.
Listed here are eight causes to contemplate promoting firm inventory.
