If a significant portion of your wealth comes from RSUs, stock options, ESPPs, or other forms of equity compensation, choosing a financial advisor is about more than managing your investment portfolio.
Equity compensation can influence nearly every aspect of your financial life, from taxes and cash flow to retirement planning and investment decisions. Because your equity strategy should evolve as your career, compensation, and goals change, it's important to work with an advisor who understands how those pieces fit together.
Here are the questions worth discussing before you decide whether an advisor is the right fit.
Questions to Ask a Financial Advisor
On paper, two different financial advisors can look the same. They could both have Certified Financial Planner (CFP) designations and a certain number of years of experience. But how they specifically handle equity compensation is a key differentiator you should pay attention to.
1. How much experience do you have working with equity compensation?
“Do you work with equity compensation?” is easy for an advisor to answer yes to. A better question is: How much experience do you have helping clients make decisions about equity compensation?
Ideally, your advisor should understand how equity fits into your broader financial picture and how decisions around your equity can affect taxes, diversification, cash flow, and long-term goals.
Other variations of the question:
- How many clients with RSUs or stock options do you currently advise?
- What types of equity compensation do you typically work with?
- How does equity compensation factor into your clients’ financial plans?
- Can you give examples of the types of decisions you help clients make?
2. How do you approach deciding when to sell company stock?
There isn’t necessarily one universally correct answer to the question, “Should I sell my RSUs when they vest?”
The right answer will depend on your tax situation, investment portfolio, financial goals, risk tolerance, future equity grants, and how much of your overall wealth is already tied to your employer.
That’s why you want to understand the advisor’s process rather than simply looking for a blanket answer. A few ways you could frame the question that could give you helpful insight into if their strategy would work for you:
- Do you recommend selling shares immediately after vesting?
- Do you use a target allocation for company stock?
- How do you factor in the tax impact of selling? (More on this one below!)
- How do you balance concentration risk with the potential upside of holding shares?
3. How do you incorporate taxes into equity compensation decisions?
Equity compensation and taxes go hand in hand. Depending on the type of equity you receive, decisions about vesting, exercising, selling, or holding shares can have significant tax implications.
Here are a few ways to ask the advisor how tax planning fits into their process:
- How do you account for my tax bracket when making equity decisions?
- Do you proactively model the tax impact of RSU vesting or stock option exercises?
- How do you plan around large vesting events?
- Do you help with tax projections?
- How do you coordinate tax strategies with my CPA or tax professional?
There’s an important distinction here: Does the advisor proactively plan for the tax consequences of your equity compensation, or do they simply help you deal with them after the fact?
4. How would you help me manage my concentration risk?
Beyond tax considerations, company stock can create a unique form of concentration risk. Your investment portfolio may be heavily invested in one company, while your salary, bonus, career prospects, and future equity grants may also depend on that same company.
That’s a lot riding on one stock. Ask the advisor:
- How would you determine how much company stock is appropriate for me to hold?
- How would you build a diversification strategy?
- Would you consider my future equity grants when evaluating my current allocation?
- How would you approach diversification if selling the stock would create a significant tax liability?
The last question is particularly important. Diversifying a concentrated position isn’t always as simple as “sell it.” It’s important for your advisor to weigh the potential tax cost of selling against the financial risk of continuing to hold a concentrated position.
5. How does equity compensation fit into my overall financial plan?
Your equity compensation shouldn't be viewed in isolation. It should be integrated into the broader financial decisions that shape your life, including retirement, charitable giving, major purchases, and estate planning.
Incorporating your equity into the broader picture helps ensure it’s working with you to accomplish your goals rather than against you in the form of tax surprises or risky concentration levels.
6. What happens when my equity situation changes?
Your equity compensation strategy shouldn’t be set once and forgotten. Your compensation package may change, and your company's stock price may rise or fall significantly over time.
Ask the advisor how they would handle situations such as:
- A new equity grant
- A significant stock price move
- A promotion, compensation change, or job transition
- Stock options nearing expiration
- A liquidity event
- A major shift in your financial goals
You want to understand whether the advisor has an ongoing process for revisiting your strategy as your circumstances evolve.
7. How are you compensated?
Equity compensation decisions can involve significant assets and complex planning. Understanding how an advisor is compensated may help you evaluate potential conflicts of interest and determine whether their recommendations are aligned with your goals.
- Are you fee-only, fee-based, or commission-based?
- Do you receive compensation from product providers?
- How are planning and investment management services priced?
Questions A Financial Advisor Should Ask You
The advisor interview shouldn’t be one-sided. In fact, a great sign that an advisor understands equity compensation is that they have a lot of questions for you, too.
Before recommending a strategy, they should want to understand what you own, what you’re likely to receive in the future, what you’re trying to accomplish, and how much risk you’re actually comfortable taking.
1. What types of equity compensation do you receive?
This one’s foundational. Each type of equity is treated differently: different vesting schedules, different rules, different tax implications—so knowing the type is key to the strategy they will recommend.
They should also want to understand the terms of those awards, including grant dates, vesting schedules, expiration dates, exercise requirements, and other relevant details.
If you’re interviewing an advisor, it may be helpful to bring your equity compensation documents. Grant agreements, vesting schedules, brokerage statements, and other relevant information can help give the advisor a much clearer picture of your situation.
2. What does your future equity compensation look like?
Imagine two people each have $300,000 in company stock. One has no additional equity coming. The other is scheduled to receive another $800,000 over the next several years.
Those may look like similar portfolios today, but they’re very different planning situations. A thorough equity compensation conversation may include questions about:
- Upcoming vesting events and expected future grants
- Changes you anticipate in your compensation
- Potential promotions or job changes
- How long you expect to remain with your employer
Looking at future equity can help an advisor plan proactively rather than constantly playing catch-up.
3. What are you trying to accomplish with your equity?
There may be a lot of emotion attached to company stock.
Maybe you believe strongly in your employer and want to continue holding shares. Or perhaps you view your equity as the money that will allow you to retire early.
Whatever the goal is, your advisor should ask about it. For example:
- Are you trying to build long-term wealth?
- Do you have a specific goal you’re funding with your equity?
- Are you hoping to maintain exposure to your company?
- Would selling your shares change your lifestyle or financial plans?
Understanding the “why” behind your equity decisions can help an advisor build a strategy you’re more likely to stick with.
4. How comfortable are you with the risk of holding company stock?
An advisor should help you think through what concentrated company stock would actually mean for you. For example:
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What would happen if your company’s stock fell 30%?
Would you be comfortable continuing to hold it? Would you like to sell it immediately? Would a significant decline force you to delay a financial goal?
And there’s another question worth considering:
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How much of your financial future is already tied to your employer?
Your salary, bonus, career trajectory, and equity compensation may all depend on the same company. That exposure matters when evaluating how much company stock belongs in your investment portfolio.
What a Good Equity Compensation Conversation Looks Like With an Advisor
When evaluating an advisor, consider whether their process includes understanding your equity, tax considerations, goals, risk tolerance, and broader financial picture before recommending a strategy.
Equity compensation decisions rarely exist in isolation. The most productive advisor conversations connect company stock decisions to taxes, cash flow, diversification, retirement planning, and long-term financial goals. As your circumstances evolve, those decisions should evolve as well.
Not Sure If Your Equity Strategy Is Working as Hard as You Are?
It’s not uncommon for executives to spend years building wealth through equity compensation without fully understanding how it fits into their overall financial plan. The decisions you make around vesting, exercising, holding, and selling can have lasting implications for your taxes, investment portfolio, and long-term goals.
If you'd like a second perspective on how equity compensation fits into your broader financial plan, a conversation with a Plancorp advisor can help you evaluate the tax, investment, and planning considerations that may affect your decisions.
Disclosure: Investments involving concentrated positions, including employer stock and equity compensation holdings, involve additional risks and may experience greater volatility than diversified portfolios. Such investments may result in significant losses if the value of the issuer's securities declines.
