CASE STUDY

liquidity eventThe Circumstance

Liquidity event: An early employee at a newly public tech company, with a large amount of company stock. Was seeking help understanding when she could monetize her stock, what her potential tax consequences would be, how to manage her ongoing stock and option awards, and how to diversify into a long-term portfolio to reach her financial goals.

Our Strategy

The ClearRock team met with her to discuss this liquidity event in the context of her overall financial life. In addition to clarifying what types of equity comp she earned, we spent time understanding her primary goal of buying a home in the Bay Area. We also explained the importance of diversifying out of a single stock, despite her positive outlook for her company.

Prioritization: Based on the client’s equity awards, we devised a tax-efficient strategy to periodically sell her vested shares. Through our comprehensive financial planning process, we developed a list of priorities for the proceeds of her stock sales. These included earmarking funds for a new home down payment, travel, and philanthropy. We also created a savings “bucket” to diversify her single stock into an all-ETF global portfolio consistent with her risk profile.

Cash Flow and Liquidity Needs: We helped her create an annual budget that balanced her expenses with her income, including paying off her remaining college and grad school debt.

The Outcome

Our client now has a strong sense of how her equity compensation can enhance her financial life. Through our comprehensive planning process, she has peace of mind knowing that her long-term goals are within her grasp.


Want more information?