Diana was a very busy executive who had accumulated significant equity compensation in the form of incentive stock options (ISOs), non-statutory options (NSOs), restricted stock units (RSUs), performance stock units (PSUs) and employee stock purchase plan (ESPP) shares. Moreover, her company’s stock had appreciated significantly over the previous 2-3 years, making her exposure to her company’s stock about 50% of her gross investable assets. To complicate matters, she faced additional restrictions, oversight and risk in exercising and selling her shares due to her officer position in the company.
Diana worked with Bordeaux Wealth Advisors (BWA) to create a plan to help reduce her concentration in her company’s stock and diversify into various asset categories outside of equities. As a first step, BWA suggested Diana limit her risk in selling her shares and the sudden price movements which could make her vulnerable to shareholder lawsuits. To accomplish this, Bordeaux recommended that she sell her shares through a 10b5-1 plan. This potential solution identifies well ahead of time when an individual is going to exercise or sell their shares, in what quantity and for how much.
Given that she had several different types of equity compensation with various cost bases, minimizing her tax liability became another key concern, so Bordeaux and Diana came up with a diversification plan. BWA was able to work directly with the stock plan administrator to review Diana’s draft plans and twice caught errors, carefully identifying what needed to be fixed to meet Diana’s long-term financial goals. With Bordeaux’s guidance, the plan was approved and, after the cooling off period, Diana was able to implement her tax sensitive diversification strategy.
Furthermore, with the help of BWA in crafting a well devised 10b5-1 diversification plan that mapped out predetermined trades, Diana (as a deemed insider) was able to take advantage of some protection from the resulting legal actions taken when the stock later experienced a significant drop in value. As a BWA client, Diana was able to experience both the immediate and long-term benefits of having a personalized investment plan.
