Over the years, we have talked with a lot of people who have been the recipients of significant stock options, or grants of stock, from their employers. For many of the people we’ve talked with, the fact that this compensation led to a concentrated position was a real eye-opener. One thing that we have heard with somewhat concerning frequency is a reliance on anecdotal evidence from colleagues about how to handle stock and / or options when making a personal financial plan. While an instinctive resonance with the situation of a peer may be a natural, entirely human instinct, these decisions should on no uncertain terms be made based on you, your own personal situation, and your goals for the future.
Many people who find themselves considering how to deal with generous stock grants or options also work closely with other people within the company that provides these benefits, and in many cases, the nature of these relationships leads to a convivial camaraderie among team members. Your colleagues in comparable positions at your employer may well have come from similar backgrounds, and it is natural to assume, based on the nature of your work and theirs, that their compensation is comparable to yours if your roles are very similar. You may even have personal relationships with your closest team members that have led to discussions about compensation. These types of conversations can often lead to sharing of opinions about how to best handle stocks and options.
The first thing you should know about financial advice from colleagues is that it is a wonderful aspect of human nature to want to use your own experience to help others you care about. When your co-worker tells you what they plan to do with their stock options, they are very likely telling you what their plans are because they value your relationship and want to try to help you. The second, and most important, thing you should know is that you should never take this type of suggestion, no matter what your relationship with the person offering it is, as information about how you should make your own financial plans. Even if a professional financial advisor helped your colleague create their financial strategy, that plan is based on their own unique circumstances and objectives, not your own life and your own needs.
Even if you have great relationships with your colleagues, trust them completely, and have reason to believe that your compensation is roughly equal to theirs, their financial circumstances, needs, and long-term plans may be radically different from your own. Your goals for retirement may differ significantly, your tax considerations may be dissimilar for many reasons, your families may be entirely unlike one another, your current cash flow requirements may be as different as night and day, and your tolerance for risk may be in a totally separate category from theirs. No matter their good intentions, and even if your compensation packages were hypothetically identical, what may be good advice for them may not be for you and your family.
The bottom line here is that you should always make sure your financial plan is based on you, your unique situation, and your goals for your future. No matter what you do for a living or where you work, you will always have co-workers you consider friends, and those people will often try to give you advice on any aspect of life you discuss with them. Where to eat, what kind of car to buy, who the best contractors for kitchen remodeling are; whenever you form a bond with someone, you can expect that some form of suggestions based on their own experiences are not far behind. By all means, read about that new restaurant, test drive that car, and get a quote for your new kitchen – but make your own decisions based on you and your life. Financial planning with your best interest in mind should follow the same model.
BFA Wealth Management’s collaborative, interactive approach to making long-term financial plans is designed to help you see the big picture, to help you navigate away from levels of risk you are not comfortable with, and to use our market acumen along with our knowledge of your individual needs to help you create strategies for achieving your own goals. Our business was built intentionally to be free from conflicts of interest and centered entirely on the value of unbiased advice, and we believe that the personal relationships we form with our clients are our most important asset. We are compensated only by our clients and bound by strict fiduciary standards, and we offer complementary introductory financial analysis to all of our clients simply because we believe it is the right thing to do. If you want an investment strategy and comprehensive financial plan designed objectively, with only your best interests in mind, we’re here for you. Let’s talk.