Finding a Wealth Management Firm Seasoned in Equity Comp

For technology professionals in the Bay Area, for our clients, equity compensation is often the single largest driver of long-term wealth. It is also among the most technically complex areas of personal finance, with tax consequences that can be permanent, planning windows that close without warning, and decisions that interact with each other in ways that are difficult to unwind.

Most wealth managers understand equities. We find far fewer understand equity compensation. This guide explains what we believe sets a firm with genuine expertise in this area apart from one that treats it as an afterthought, and what to look for when evaluating advisors.

The complexity of equity compensation is not simply a matter of paperwork. The decisions that arise around RSUs, stock options, and other equity instruments have meaningful, lasting tax consequences that depend on timing, personal tax situation, company structure, and applicable law. An advisor who approaches these decisions without deep experience in the area is likely to miss material planning opportunities or, worse, create tax events that could have been avoided.

Consider a few scenarios that arise routinely for technology professionals:

ISO exercise and AMT exposure

An employee exercises incentive stock options (ISOs) in a year when the stock price is elevated. If not planned carefully, the spread between the exercise price and the fair market value at exercise is subject to the alternative minimum tax (AMT), which can generate a six-figure unexpected tax bill even if no shares are sold.¹ The AMT credit generated may be recoverable in future years, but recovering it requires continued planning and often depends on income patterns the employee cannot fully control.

QSBS eligibility at a liquidity event

A founding employee holds stock that may qualify for the gain exclusion under IRC Section 1202, which allows federal capital gains exclusions of up to $10 million on qualifying small business stock held for more than five years.² The requirements for QSBS eligibility are narrow and must be verified before any disposition. An advisor who does not know to raise this question before a liquidity event could cost the client real money.

The 83(b) election window

An employee at a pre-IPO company is granted restricted stock and has 30 days from the grant date to file an 83(b) election with the IRS.³ If filed, the employee is taxed on the value of the stock at the time of grant, rather than at vesting, which can substantially reduce ordinary income tax exposure if the stock appreciates. If the window closes, the opportunity is gone permanently.

These are not edge cases. They are recurring situations for professionals working at Bay Area technology companies, and they require an advisor who anticipates them rather than reacts to them.

Equity compensation comes in several forms, each with distinct tax treatment, planning implications, and strategic considerations.

Restricted Stock Units (RSUs)

In our experience, RSUs are the most common form of equity compensation at large publicly traded technology companies. At vesting, the fair market value of the shares is taxed as ordinary income, subject to federal and California income tax.⁴ Shares are typically withheld by the employer to cover estimated taxes, but the withholding rate may not reflect the employee’s actual marginal rate, creating a potential year-end tax liability.

The core planning question with RSUs is what to do with shares after they vest. Holding a growing concentration in employer stock compounds both investment risk and tax complexity. We believe a systematic diversification plan, designed around the employee’s tax situation and financial goals, is the appropriate response for most of our clients.

Incentive Stock Options (ISOs)

ISOs receive preferential tax treatment: if holding period requirements are met, gains on the sale of ISO shares may qualify for long-term capital gains rates rather than ordinary income rates.⁵ However, the spread at exercise is a preference item for AMT purposes, and the interplay between regular tax and AMT requires careful analysis.

The timing of ISO exercises, the volume of options exercised in a given year, and the decision of when to sell shares all need to be coordinated. This is an area where multi-year planning has significant value; the decisions made in year one affect the tax situation in year two and beyond.

Non-Qualified Stock Options (NQOs or NSOs)

Unlike ISOs, the spread on NQO exercise is taxed as ordinary income in the year of exercise, regardless of whether shares are sold.⁶ There is no AMT complication, but the ordinary income treatment means NQO exercise timing is a straightforward tax planning problem: in what year does it make sense to recognize this income, and how does it interact with other compensation events?

Employee Stock Purchase Plans (ESPPs)

ESPPs allow employees to purchase company stock, typically at a discount of up to 15%, through payroll deductions.⁷ The tax treatment of ESPP shares depends on whether the shares are sold in a qualifying or disqualifying disposition, which in turn depends on holding period requirements. We see many employees participate in ESPPs without understanding the tax consequences of different sale timing decisions.

Qualified Small Business Stock (QSBS)

Under IRC Section 1202, shareholders of qualified small business stock may exclude up to $10 million in capital gains from federal income tax, provided the stock has been held for more than five years and the issuing company meets specific requirements at the time of issuance.⁸ California does not conform to the federal QSBS exclusion, meaning California state taxes would still apply to qualifying gains. For early employees at startups that later achieve significant valuations, we think QSBS eligibility is among the most valuable tax-planning opportunities.

A generalist wealth manager who is competent at portfolio construction and basic financial planning may still be poorly equipped to handle equity compensation for several reasons.

Lack of proactive planning.

Equity compensation requires anticipating events, not just responding to them. The 83(b) election window is 30 days. ISO exercise decisions need to be evaluated against the prior year’s AMT exposure and next year’s expected income. These are not items to address at the annual review; they require ongoing, proactive monitoring.

Tax and investment managed in silos.

Effective equity compensation planning requires close coordination between investment decisions and tax strategy. If the wealth manager and the CPA are not in regular communication, we find material planning opportunities are routinely missed. Firms that integrate tax planning with investment management, or that maintain in-house tax expertise, are well-positioned to handle this coordination.

Insufficient familiarity with private company equity.

Many advisors have experience managing publicly traded securities but less experience with the distinct considerations that arise around pre-IPO equity: 409A valuations, secondary market liquidity, tender offers, and the specific requirements for QSBS eligibility. Bay Area professionals frequently hold significant positions in private companies alongside their public market holdings, and both require expert attention.

Concentration risk underweighted.

Advisors who are not equity compensation specialists may underweight the risk of a large, undiversified employer stock position. The appropriate framework for managing a concentrated position depends on the employee’s tax situation, the stock’s liquidity, any trading restrictions in place, and the employee’s broader financial picture. A one-size-fits-all recommendation to “diversify over time” is not a plan.

We believe a firm with genuine equity compensation expertise will typically demonstrate several characteristics that distinguish it from generalist practices.

A structured equity comp review process. Rather than addressing equity compensation reactively, experienced firms maintain an ongoing calendar of planning events tied to each client’s vesting schedule, anticipated liquidity events, and annual tax situation. This includes proactive outreach before key deadlines.

Multi-year tax modeling. The value of coordinated equity compensation planning is often realized over multiple years. A firm with deep experience in this area will model the tax implications of different exercise and sale strategies across a multi-year horizon, not just in the current year.

Familiarity with company-specific plan documents. Stock option and RSU plan documents vary by company. Restrictions on when options can be exercised, rules around post-termination exercise windows, and the specific terms of any equity acceleration provisions are all plan-specific. An experienced advisor reviews these documents rather than assuming standard terms apply.

Integration with estate and charitable planning. Equity compensation intersects with estate planning in important ways, particularly for clients who hold low-basis stock. Charitable remainder trusts, donor-advised funds, and direct charitable gifting of appreciated shares are strategies that require coordination across financial planning, tax, and estate planning disciplines.

Specific experience with Bay Area technology companies. An advisor who has worked extensively with employees at Bay Area technology companies will have direct familiarity with the plan structures, vesting schedules, and liquidity events that are common in this environment.

Before engaging a wealth management firm, the following questions will help evaluate the depth of their equity compensation expertise.

What percentage of your clients receive equity compensation as a significant part of their overall compensation? This establishes whether the advisor is working with equity comp routinely or occasionally.

Walk me through how you would approach an ISO exercise decision. Listen for specific references to AMT exposure, the regular tax liability, multi-year planning, and the interaction with other income. Vague answers are informative.

How do you handle the 83(b) election process for clients who receive restricted stock? An experienced firm will have a defined process, not a general familiarity with the concept.

Have you worked with clients holding QSBS? How do you evaluate eligibility and plan around it? This is a narrow area; experience here is meaningful.

How do you coordinate with my CPA or tax preparer? The answer should describe a specific, ongoing working relationship, not a general willingness to cooperate.

How do you approach concentrated stock positions? Look for a structured framework that addresses tax efficiency, diversification timeline, and the tools available (exchange funds, collars, systematic sale programs, charitable strategies).

What is your process for monitoring upcoming vesting events and planning deadlines? The answer should describe a proactive system, not a reactive response to client inquiries.

Summitry is a Bay Area RIA focused on financial life planning for high-earning professionals. A significant portion of the firm’s clients hold equity compensation as a central component of their wealth, which has shaped the firm’s planning process and expertise over time.

Summitry’s approach to equity compensation integrates tax planning and investment strategy rather than treating them as separate workstreams. The firm maintains an ongoing review calendar tied to each client’s equity events, coordinates directly with clients’ CPAs on tax implications, and brings experience with the range of equity structures common at Bay Area technology companies, including pre-IPO equity, QSBS analysis, and ISO/NQO planning.

Here is how Summitry fits the profile of a firm seasoned in equity compensation:

• Proactive planning cadence: Summitry maintains an ongoing equity event calendar for each client, tracking vesting schedules, option expiration dates, and planning deadlines rather than waiting for clients to raise them.
• Tax-aware advisors: While Summitry coordinates with clients’ external CPAs on tax preparation, every advisor at the firm is trained to think through the tax implications of equity decisions as a standard part of the planning process.
• Plan document review: Summitry reviews each client’s company-specific equity plan documents, including option agreements and RSU award terms, rather than assuming standard terms apply.
• Experience across all equity types: The firm has worked with clients holding RSUs, ISOs, NQOs, ESPPs, QSBS, and pre-IPO equity, including situations involving secondary market liquidity, tender offers, and 409A valuations.
• Integrated investment and tax strategy: Equity compensation decisions at Summitry are made in coordination with the client’s broader investment strategy, not in isolation.
• Estate and charitable planning coordination: For clients with low-basis concentrated positions or significant equity wealth, Summitry coordinates estate and charitable planning strategies, including working directly with clients’ attorneys to ensure alignment across all planning disciplines.
• Bay Area technology focus: The firm’s client base is concentrated among Bay Area technology professionals, which means the equity compensation situations Summitry encounters are not occasional exceptions but everyday practice.

Several directories can help identify advisors with demonstrated expertise in equity compensation and fee-only structures:

• NAPFA Advisor Search at org: The fee-only advisor directory, searchable by location and specialization
• XYPN Advisor Search at com: A network of fee-only planners, including many who specialize in equity compensation for tech professionals
• SEC Adviser Info at sec.gov: Read Form ADV Part 2 for any advisor you are evaluating; it discloses services, fees, and conflicts of interest
• CFP Board’s Advisor Search at net: Confirms CFP certification status and any disciplinary history

When evaluating candidates, ask for references from clients who hold or have held substantial equity compensation positions. Direct client experience is the most reliable signal of genuine expertise.

¹ Internal Revenue Service, “Alternative Minimum Tax,” IRS Publication 525, irs.gov/publications/p525
² Internal Revenue Code Section 1202, “Partial Exclusion for Gain from Certain Small Business Stock”
³ Internal Revenue Code Section 83(b), “Election to Include in Gross Income in Year of Transfer”
⁴ Internal Revenue Service, “Restricted Stock Units,” IRS Publication 525, irs.gov/publications/p525
⁵ Internal Revenue Code Section 422, “Incentive Stock Options”
⁶ Internal Revenue Code Section 83, “Property Transferred in Connection with Performance of Services”
⁷ Internal Revenue Code Section 423, “Employee Stock Purchase Plans”
⁸ Internal Revenue Code Section 1202, “Partial Exclusion for Gain from Certain Small Business Stock”; California Revenue and Taxation Code Section 18152.5 (non-conformity)

This material is intended for general informational purposes only, and should not be construed as legal, tax, investment, financial, or other advice. It does not consider the specific investment objectives, tax, and financial condition or needs of any specific person. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Investing involves the risk of loss, including loss of principal. Any examples are meant for illustrative purposes only and do not represent actual clients or their experiences. There can be no guarantee that experiences will be similar to those used as examples in this article and some may experience negative results. Prices are not taken from actual stock prices and are designed to make the example clear and simple to understand. The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.