Inventory grants, inventory choices, restricted inventory items (RSUs), worker inventory buy plans (ESPPs) and different types of stock-based compensation can assist your shoppers construct wealth. It’s vital to have a plan in place to handle these shares for shoppers who profit from this kind of compensation.
Inventory-based compensation includes not solely the compensation side but in addition managing the shares your shopper in the end receives to successfully maximize their worth. It’s vital to impress upon your shopper that they should take care of these shares as they might another element of their funding portfolio. This contains 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 might be perceived as being disloyal to their employer in the event that they promote the shares. Aside 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 elements with firm inventory is focus danger. That is the danger of holding an outsize place in any single inventory. The danger is even better 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 properly.
Shoppers receiving stock-based compensation want your experience and objectivity in advising on one of the best ways to make the most of this kind of compensation. This may 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.