Description
Concentrated stock exposure, whether from employee compensation, inheritances, or preference, can leave client portfolios vulnerable to outsized risk and limited flexibility. A market downturn or unforeseen financial need magnifies the dangers of concentrated stock while also putting the client’s overall goals at risk. In attempting to address this risk, advisors can face significant obstacles from the tax implications of concentrated stock but also from emotional attachments and behavioral biases associated with these positions. In this webinar, John Nersisan walks through scenarios that can lead clients to have concentrated stock positions and their associated risks. Then, he provides strategies to mitigate the risks associated with those concentrated positions based on client objectives. Client objectives such as liquidity, tax minimization, diversification, and wealth transfer are discussed in alignment with the benefits and drawbacks of mitigation strategies, such as stock sales, zero premium collars, exchange funds, and charitable giving.
Learning Objectives
1. Explain the risk associated with having a concentration of stock.
2. Identify situations that may lead a client to have a concentrated stock position and the obstacles associated with planning for that stock.
3. List the characteristics and tax implications of restricted stock compared to employee stock options and identify strategies to minimize the tax implications.
4. Match strategies to mitigate concentrated stock risk to client objectives of liquidity, diversification, and hedging.
5. Evaluate the advantages and disadvantages of utilizing charitable giving to meet a client’s objective of transferring wealth while also addressing concentrated stock.