Financial Planning for Equity Compensation
RSUs, stock options, and ESPPs can represent a significant portion of your total compensation. Most people don't have a plan for them. We help professionals in tech, space, and defense understand what they have, make smart decisions about when to act, and avoid the tax mistakes that tend to be costly and irreversible.
Who We Work With
Employees receiving restricted stock units who want to understand the tax impact at vesting and build a strategy for what to do with shares as they accumulate.
RSU Recipients
Stock option holders
Professionals holding ISOs or NQSOs who need guidance on exercise timing, tax consequences, and how to avoid being caught off guard by a large bill.
Pre-IPO employees
Employees at private companies with equity grants who want to understand their options and plan ahead for a potential liquidity event.
ESPP participants
Employees participating in stock purchase plans who want to maximize the benefit and understand the holding period rules that affect how gains are taxed.
What We Often Find
- Equity compensation is treated as a bonus rather than a coordinated part of a financial plan. Decisions get made at vest or expiration without a framework.
- The tax impact of exercising options or selling vested shares is underestimated. At higher income levels, a single event can push someone into a much higher bracket for the year.
- Concentration risk is significant but invisible. A large portion of net worth is tied to a single company's stock price without a clear plan to diversify over time.
- ESPP plans are underutilized or poorly timed. The discount benefit is real but the tax treatment at sale depends on holding periods that most participants don't track.
- Pre-IPO equity is treated as lottery tickets rather than real assets. Without a plan, employees are often unprepared for the tax events that follow a liquidity event.
What We Help With
Exercise timing and strategy
Determining when to exercise options, how much to exercise in a given tax year, and which grants to prioritize based on expiration, spread, and tax impact.
Tax planning around equity events
Coordinating vest dates, exercises, and sales with your overall income picture to minimize what you owe and avoid surprises at year end.
Concentration and diversification
Building a systematic plan to reduce exposure to a single stock over time without triggering unnecessary tax events or selling at the wrong moment.
Pre-IPO planning
Understanding your grants, modeling potential outcomes, and preparing for the financial and tax complexity that comes with a liquidity event.
ESPP optimization
Maximizing your plan's discount benefit while managing the tax treatment at sale based on whether shares qualify for favorable long-term rates.
Comprehensive financial planning
Integrating equity compensation into a full financial plan that covers investments, retirement, taxes, and long-term wealth building as your career grows.
Most advisors focus on the investment side and overlook the rest. We focus on the decisions that
actually move the needle -- exercise timing, tax coordination, and building a diversification plan that reduces risk without triggering avoidable costs. Equity comp is built into every financial plan we create, not treated as a side conversation.
Equity compensation is 25% investment and 75% taxes.
OUR APPROACH
$370k
$250k + $120k
Combined Income:
$3.75
Per share
Current FMV
175,000
Across two grants
Total options
$25k/yr
Annual purchase limit
ESPP limit
The Smiths: Making sense of equity at a pre-IPO company
HYPOTHETICAL CASE STUDY
Equity Snapshot | The Smiths
HYPOTHETICAL CASE STUDY
Grant 1 - 2020
Options granted 100,000
Strike price $1.17
Current FMV $3.75
Spread per share $2.58
Total spread $258,000
Vesting 25%/yr, 4 yrs
Fully vested
Grant 2 - 2024
Options granted 75,000
Strike price $3.25
Current FMV $3.75
Spread per share $0.50
Spread (vested) $9,375*
Vesting 25%/yr, 4 yrs
25% vested (18,750 shares)
- Grant 1 is fully vested with a meaningful spread. Exercising triggers ordinary income tax -- at $370k household income, that is a significant event requiring coordination with the couple's overall tax picture.
- Grant 2 has minimal spread today but with a rumored IPO on the horizon, timing and strategy matter more than they appear right now.
- The ESPP adds another layer. Depending on the plan structure, it may create ordinary income at purchase, at sale, or both.
- All three equity components are tied to the same private company, meaning compensation, equity value, and future liquidity are all correlated with one outcome.
The Situation | The Smiths
HYPOTHETICAL CASE STUDY
Planning Areas Explored | The Smiths
HYPOTHETICAL CASE STUDY
Exercise timing for Grant 1
With a live spread and full vesting, the question is when and how much to exercise in a given tax year to manage ordinary income exposure.
Pre-IPO strategy
Understanding the difference between exercising before vs. after a liquidity event and what each means for income recognition and tax liability.
ESPP participation
Maximizing plan contributions while managing sale timing and holding periods to optimize the tax treatment of proceeds.
Concentration risk
Building a diversification framework so a single liquidity event does not define the couple's entire financial outcome.
For the Smiths, the equity is real but so is the complexity. Most of the value in their situation is not investment selection. It is understanding the rules, sequencing decisions correctly, and not letting a good situation turn into a large and avoidable tax bill. The planning work happened before the liquidity event, not after.
The Takeaway | The Smiths
HYPOTHETICAL CASE STUDY
Disclaimer: This is a hypothetical case study for educational purposes only. It does not represent any specific individual or constitute financial, tax, or legal advice. Results will vary based on individual circumstances.
Start with a 15-minute intro call
GETTING STARTED
No pressure, no commitment. We will get to know each other, answer your questions, and figure out if it makes sense to keep the conversation going.
+ We work with clients in person and virtually.
+ Flexible scheduling including evenings and weekends
+ No account minimums to start a conversation
The Freyr Group is a registered investment advisory firm. This page is for informational purposes only. Services described are general in nature. Individual results will vary based on personal circumstances. Past performance does not guarantee future results. Investment advisory services involve risk including potential loss of principal. The Freyr Group does not provide legal or tax advice. Please consult qualified professionals regarding your specific situation.
