How Can Tech Professionals Achieve Financial Success? Part 3

This is part 3 of a 3-part series on how tech professionals can create and sustain financial success while avoiding potential traps. Here is Part 1 and Part 2.

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Step 5: Smart Investment Strategies

Manage and reduce concentrated positions while diversifying your portfolio to protect your assets and grow wealth. 

One of the biggest challenges many tech professionals face is concentrated stock positions, often stemming from stock options, RSUs, or ESPP shares in their own company. While holding a significant portion of your net worth in company stock can be lucrative if the stock performs well, it also exposes you to high levels of risk if the company’s value drops. To mitigate this, it’s essential to develop a strategy to gradually reduce your concentrated positions over time. 

Diversification is key to reducing risk while growing your wealth. By selling portions of your company stock at strategic intervals, especially after key vesting dates or once stock options become exercisable, you can reinvest the proceeds into a diversified portfolio that spreads risk across multiple asset classes, sectors, and geographies. This reduces the risk of your financial future being tied too closely to the performance of a single company, protecting your assets from volatility while positioning you for long-term growth.

There are a variety of tools and strategies available to help you manage this transition. For example, structured stock sales like 10b5-1 plans allow you to pre-schedule stock sales to avoid timing the market, adhere to financial regulations, and minimize the impact on the stock price. Donating appreciated stock is also a commonly used approach to reducing an over concentrated position.

Ultimately, the goal is to build a portfolio that aligns with your long-term financial goals, whether that’s retirement, philanthropic giving, or building generational wealth. By reducing concentrated positions and diversifying into a broader set of investments, you can protect your assets from company-specific risks while continuing to grow your wealth. It’s a careful balancing act that requires proactive planning and regular , but doing so ensures your financial security isn’t overly dependent on the success of a single stock. 

If you need assistance weighing the risk of a concentrated position, financial planners often have access to software that produces a complete valuation and risk analysis. This type of analysis includes key calculations and metrics on equity awards and holdings to help you determine when it is appropriate to conduct specific actions, such as selling or exercising. These tools are usually not provided or available through your stock plan administrator reporting.

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‍Step 6: Protect What Matters Most

Ensure your family and assets are safe through proper estate planning and risk management. 

It’s essential to not only focus on building wealth but also on protecting what you’ve worked hard to achieve. Estate planning is a key element in safeguarding your family’s future and ensuring that your assets are distributed according to your wishes. Sadly, tragic events do happen, usually when we least expect it. Without proper estate planning, your wealth could be tied up in probate or subject to heavy taxes, leaving less for your heirs. By establishing a will, trusts, POAs, directives, and beneficiary designations, you can control how your assets (especially equity awards like stock options or RSUs) are passed down, ensuring that your loved ones are taken care of. 

Equally important is risk management through insurance. Life insurance, particularly term life, can provide financial security to your family in case of an unexpected event, covering future expenses such as mortgage payments, education costs, or replacing your lost income. For tech professionals with significant equity, it’s crucial to have enough coverage to protect the value of both your liquid assets and your company stock, ensuring that your family maintains financial stability.

Disability insurance is another key protection, as your ability to earn an income is one of your most valuable assets. If illness or injury prevents you from working, disability insurance ensures you continue receiving a portion of your salary. This is especially important for tech professionals who rely on their ongoing income to meet lifestyle needs and future financial goals. 

Lastly, umbrella insurance offers an additional layer of liability protection beyond standard homeowners and auto policies. With significant assets at stake, including equity holdings and other investments, you want to make sure that unexpected lawsuits or large claims don’t jeopardize your wealth. Umbrella insurance helps protect you from liability claims that could otherwise erode your assets, giving you peace of mind. 

By integrating estate planning and comprehensive insurance strategies into your financial plan, you ensure that both your family and your assets are protected, no matter what the future holds.

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Step 7: Work with a Fee-Only, Fiduciary Financial Planner

Gain confidence with a professional who prioritizes your interests, providing transparent, objective advice to help you navigate complex financial and equity compensation decisions. 

As a tech professional with complex equity compensation, collaborating with a fee-only, fiduciary financial planner can be one of the smartest moves you make to ensure your financial success. Unlike commission-based advisors, fiduciary financial planners are legally obligated to act in your best interest, offering transparent and objective advice. This is especially critical when navigating the complexities of stock options, RSUs, and ESPP shares, where the wrong decision could lead to unnecessary taxes, missed opportunities, or excessive risk.

“Only 46% of equity recipients know how to reach someone if they have a question about their stock awards/ plan.”

A fee-only financial planner is compensated only by the client, never from commissions, vendors, or third parties. The planner provides objective guidance tailored to your unique financial situation, helping you align your equity compensation strategy with your broader financial goals. Whether you’re deciding when to exercise stock options, how to manage concentrated positions, or balancing tax deferral strategies, a fiduciary planner helps you make informed decisions that maximize the long-term value of your equity awards. They also ensure that your investment strategy, retirement planning, and estate planning are aligned with your wealth-building efforts. 

Beyond just equity compensation, a fiduciary financial planner takes a holistic view of your financial life, addressing other critical areas such as tax planning, insurance needs, and risk management. By having an experienced professional in your corner, you gain the confidence that every decision, whether about your portfolio, estate planning, or tax strategies, is being made with your best interests in mind. This partnership gives you peace of mind, knowing that you’re on the right path to financial security and long-term wealth. 

The reality is that you might be in a position where you prefer to manage your own financial affairs. That is totally acceptable. On the other hand, those tech professionals who seek out the services of a financial planner usually have a demanding career, lead a busy family life, and lack the desire, time, expertise, or discipline to manage their own financial affairs. It’s a personal choice. 

If you’re ready to simply have a conversation and determine if it makes sense to get professional financial advice, we would welcome that opportunity. It’s complimentary! And if we’re not the right fit, we’ll tell you up front.

Book your Free Assessment today!

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Stu Sneen, CFA, CFP® | Founder & Financial Planner

Stu@twotenplanning.com

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The foregoing content reflects the opinions of TwoTen Planning and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as financial, legal, tax, or investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential loss of principal. Quote Source: 2022 Morgan Stanley Annual Stock Plan Participant Survey. Article constructed with assistance of ChatGPT.

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