As a financial adviser based in Sydney, Australia, my role is to help clients navigate the intricate world of finance and investments. Recently, I had the privilege of assisting a client who is an Information Technology professional in making a strategic move to purchase additional employee shares at a reduced rate while simultaneously selling the same number of shares of vested RSUs (Restricted Stock Units). This is a success story that highlights the importance of sound financial advice and the potential benefits it can bring to individuals in the tech industry.
The importance of understanding a client’s financial circumstances
My client, let’s call him John, is an IT professional working for a prominent tech company. He had been granted RSUs as part of his compensation package, which had vested over a period of time. While John was eager to maximise his investments, he was also aware of the need to diversify his portfolio and mitigate risks.
A vital step: assessing the investment options
The challenge was clear: John wanted to leverage the reduced-rate employee share purchase program offered by his company while managing the risk associated with holding too much company stock. We began by thoroughly analysing his financial situation, risk tolerance, and long-term goals.
Crafting a strategic plan
After comprehensive discussions and analysis, we formulated a strategic plan that allowed John to seize the opportunity of the reduced-rate employee shares while mitigating potential downsides.
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The investment plan in action
Here’s how the strategic plan worked:
1. Purchase of additional employee shares
We advised John to take advantage of his company’s employee share purchase program, which allowed him to buy additional shares at a discounted price. This move would not only increase his stake in the company but also align his interests with the company’s performance.
2. Selling vested RSUs
To mitigate the risk of overexposure to a single stock, we recommended that John sell the same number of shares from his vested RSUs. This would help diversify his investment portfolio and reduce the concentration of his wealth in one asset.
3. Tax-efficient execution
We ensured that the transactions were executed in a tax-efficient manner, considering both short-term and long-term capital gains tax implications. This optimisation helped John minimise his tax liability.
Achieving the desired balance when investing
By implementing this strategy, John not only acquired additional shares at a reduced rate but also effectively reduced his exposure to his company’s stock. This balanced approach provided him with greater financial security and aligned his investments with his long-term goals.
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The financial outcome
As a result of this well-thought-out strategy, John was able to take advantage of the discounted shares offered by his employer while diversifying his investment portfolio. This approach not only helped him manage risk but also positioned him for potential future financial growth.
The client success story
This success story underscores the importance of seeking professional financial advice, especially when dealing with complex financial situations as everyone’s circumstances are different. As a financial adviser, it is my privilege to assist clients like John in achieving their financial objectives, no matter their profession or level of financial literacy. In the ever-evolving world of finance, strategic planning and expert guidance can make all the difference, empowering individuals to make informed decisions and help secure their financial future.
Scott Ungaro. Senior Financial Adviser. Profile Financial Services.
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