Why Should You Diversify Beyond Your Company Stock Before It’s Too Late?
True Root Financial is a financial advisor and financial planner based in San Francisco, CA. We serve clients across the globe.
For high-net-worth tech professionals, holding a large amount of your net worth in your employer’s stock can feel like a jackpot. RSUs, stock options, or early founder shares can quickly grow into multi-million-dollar positions.
If you are a tech professional interested in learning how we can help you claim your financial independence by investing wisely, minimizing taxes, and maximizing your equity compensation, please book a no-obligation call here.
But this kind of wealth can also become a hidden vulnerability. When your salary, career prospects, and investments all live under one roof, a problem at your company can affect every part of your financial life at once. This is called concentration risk, and reducing it is the heart of our equity-optimization process. Watch the video below to learn more in detail.
Key Takeaways:
- Gap analysis shows how much equity is safe to sell without jeopardizing goals
- A multi-year selling plan manages taxes and smooths cash flow
- Scenario modeling helps you navigate IPOs, downturns, and flat markets
- Cashless exercises and 10b5-1 plans make sales automated, compliant, and stress-free.
We Start With a Gap Analysis!
We temporarily remove every share of your company stock from your financial plan, as if it didn’t exist. Then we ask:
- Without this equity, could you still fund all your goals—private-school tuition, your lifestyle, philanthropic projects?
If the answer is “yes,” you have room to diversify.
If the answer is “no,” you know exactly how much equity must remain to meet your plan.
Think of your company stock like an inheritance of a prime vineyard. In a good year, you harvest world-class wine that supports your lifestyle. But if the vines fail, you could run dry. Selling a portion of this year’s yield to buy grapes elsewhere ensures your portfolio stays balanced.
Creating a Multi-Year Selling Schedule
Once we know how much equity is safe to sell, we craft a multi-year selling schedule aligned with your vesting calendar and tax-bracket goals.
For example, one client with $8 million in RSUs determined through the gap analysis that $4 million was enough to fund their goals. We structured sales like this:
- Year 1: $600,000
- Year 2–5: $700,000 each year
This approach:
- Keeps marginal tax rates below 37% each year
- Frees capital for other goals, like buying a second home
- Prevents unexpectedly large tax bills
- Modeling Different Scenarios
Whether you’re in a publicly traded tech company or leading a late-stage startup, we model different exit scenarios:
- IPO at $50 per share
- Flat at $35 per share
- Downturn to $20 per share
We recommend selling just enough shares to fund critical goals, such as:
- Funding a family foundation
- Seeding your next venture
- Supporting a multi-year sabbatical
This ensures your portfolio stays balanced, even if market conditions change.
Can You Exercise Stock Options Without Selling Your Entire Position?
To execute these plans smoothly, we use cashless option exercises. This allows you to exercise stock options without selling your entire position. We leverage your broader assets as collateral so you don’t have to liquidate everything at once.
We also set up 10b5-1 trading plans. These:
- Automatically schedule sales at pre-set intervals
- Eliminate emotion from decision-making
- Ensure compliance with insider-trading rules
This combination makes the process predictable, disciplined, and compliant, protecting both your wealth and your reputation.
How to Convert Concentrated Equity into Predictable Wealth?
By combining:
- A precise gap analysis
- Phased sales to manage tax exposure
- Sophisticated execution tools
…we turn the volatility of concentrated company stock into a predictable, multi-million-dollar engine for your financial and legacy goals.
This approach is especially important for tech professionals whose wealth grows faster than traditional income. Without careful planning, a large equity position can introduce unexpected risk and tax exposure.
Final Thought
Diversifying your company stock is not about giving up potential gains; it’s about stability and control. By carefully analyzing your financial plan, structuring phased sales, and using sophisticated execution tools, high-net-worth tech professionals can reduce risk, manage taxes, and convert concentrated equity into lasting financial security.
Your Next Steps:
In the tech world, where stock wealth can grow quickly, predictability matters just as much as growth. The right strategy turns potential risk into a reliable source of funds for your lifestyle, philanthropy, and legacy. Book a call below:
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