8 Reasons to Sell Company Stock
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Stock grants, stock options, restricted stock units (RSUs), employee stock purchase plans (ESPPs) and other forms of stock-based compensation can help your clients build wealth. It’s important to have a plan in place to manage these shares for clients who benefit from this type of compensation.
Stock-based compensation involves not only the compensation aspect but also managing the shares your client ultimately receives to effectively maximize their value. It’s important to impress upon your client that they need to deal with these shares as they would any other component of their investment portfolio. This includes selling or divesting shares if it makes good investment sense for them.
There are some recipients of stock-based compensation who feel that they may be perceived as being disloyal to their employer if they sell the shares. Other than any restrictions set forth by their employer’s stock compensation plan, these shares are part of your client’s compensation to do with as they see fit.
One of the unique risk factors with company stock is concentration risk. This is the risk of holding an outsize position in any single stock. The risk is even greater if the concentrated position is in an employer’s stock. Not only is your client exposed to the risk of a severe downturn in the shares, but if this downturn is due to issues with the company, their livelihood could be at risk as well.
Clients receiving stock-based compensation need your expertise and objectivity in advising on the best way to utilize this type of compensation. This can include advising them when to sell or otherwise divest themselves of these shares. Taxes will often come into play when looking to divest a client’s company shares, and this needs to be a consideration when recommending a course of action.
Here are eight reasons to consider selling company stock.
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