By Michael Henley, CFP®, CPWA®, CRPC®, RMA®
You have spent years building your career at a company you believe in. Along the way, equity compensation has accumulated. Restricted stock units that have vested, stock options you have exercised, shares purchased through an employee stock purchase plan, or simply a position that has grown significantly over time.
On paper, it looks like wealth. And it is. But it is also concentrated. And concentration, without a plan to manage it, carries a level of risk that many executives do not fully appreciate until something forces the issue. At Brandywine Oak, we like to say that owning a single stock is gambling; owning thousands of stocks is investing.
What happens to my financial picture if the stock drops 40%?
Am I too exposed to the company I work for?
How do I start diversifying without triggering an enormous tax bill?
These are questions we work through regularly with corporate executives at Brandywine Oak Private Wealth. The answers are rarely simple, but they are almost always worth the conversation.
The Risk That Feels Invisible When Things Are Going Well
For most executives, concentrated stock exposure builds gradually and quietly. A vest here, an option exercise there, a small % contribution rate to the company stock in your 401(k) plan, a purchase plan that runs in the background. Over time, a single stock can come to represent 30%, 50%, or even more of a family’s total investable wealth, often without anyone sitting down and deciding that was the right allocation.
The challenge is that concentration feels comfortable when the stock is performing well. It can even feel like conviction. But there is an important distinction between believing in a company and having your entire financial future tied to it.
Consider what it means when your income, your benefits, your bonus, your equity, and a substantial portion of your investment portfolio are all connected to the same employer. A company-specific event such as a missed earnings report, a regulatory action, a leadership change or a sector-wide downturn can affect all of those simultaneously. Diversification exists precisely to prevent one event from causing disproportionate harm to your overall financial picture.
Imagine planting a tree 20-30 years ago next to your house. Eventually it grows so large that it is encroaching on your house. You would trim back the tree to avoid damage to your home, and the same is true with your investment portfolio. A concentrated stock position can encroach on the rest of your portfolio over time without proper risk controls.
Most financial plans are built to withstand market volatility. Fewer are built to withstand the failure or significant decline of a single stock that represents the majority of a family’s wealth.
The Tax Reality That Complicates Every Decision
For many executives, the barrier to diversification is not indecision. It is taxes.
When a concentrated position has appreciated significantly, selling means recognizing a capital gain. Depending on the cost basis, the holding period, your income in the year of the sale, and your state of residence, that tax bill can feel like it swallows a significant portion of what you would receive.
This is a real constraint, and it deserves to be taken seriously. But it is also worth reframing. The tax bill on a gain is a consequence of growth. The alternative, holding an undiversified position and watching it decline, can cost more than the tax ever would have. Paying tax on a gain is not a loss. It is the cost of converting paper wealth into real, diversified, protected wealth.
That said, there are often ways to manage the timing and structure of diversification to reduce the tax impact meaningfully. The goal is not to eliminate taxes, but to avoid paying more than necessary while building a more resilient financial position.
Strategies Worth Understanding
There is no single approach that works for every executive in every situation. The right strategy depends on your cost basis, your stock plan restrictions, your income in the current and future years, your charitable goals, your timeline, and your overall financial picture. What follows is an overview of the approaches we most commonly use with clients navigating this challenge.
Systematic Diversification Over Time
The simplest and most straightforward approach is to sell a portion of the concentrated position each year, spread across multiple tax years, in a way that keeps capital gains manageable relative to your overall income picture.
This approach does not require complex structures or specialized vehicles. It requires a plan, discipline, and coordination between your advisor and your tax professional to ensure each year’s sale is calibrated to your tax bracket and overall situation.
For executives who are still receiving equity awards and continuing to accumulate shares, systematic selling can be paired with a policy of not holding more of each new vest than is consistent with a well-diversified portfolio. This prevents the position from growing faster than it is being reduced.
Rule 10b5-1 Trading Plans
Executives at public companies are typically restricted in when they can buy or sell company stock. Sales are generally only permitted during specific windows that open after earnings releases and other scheduled company announcements. Outside of those windows, trading is off limits which can make it difficult to execute a consistent diversification strategy.
A 10b5-1 plan offers a way around that timing problem. It allows an executive to set up a pre-scheduled selling program during a period when trading is permitted, with sales then executing automatically according to that schedule going forward. Because the plan is established in advance and follows a predetermined schedule, it can allow sales to occur even outside of traditional open windows once the plan is in place.
These plans require advance planning, coordination with your company’s legal team, and careful setup. But for executives who want to sell consistently over time without constantly navigating trading restrictions, they are worth understanding as part of a broader diversification strategy.
Gifting Appreciated Shares to a Donor-Advised Fund
For executives who have charitable intentions, one of the most tax-efficient strategies available is donating appreciated shares directly to a donor-advised fund rather than selling the stock and donating cash.
When you donate appreciated stock held for more than one year, you generally receive a charitable deduction for the full fair market value of the shares at the time of the gift. You do not recognize the embedded capital gain on the shares donated. The shares are then sold inside the fund, and the proceeds are available to be granted to the charitable organizations you choose, on your timeline.
This approach accomplishes two things simultaneously: it reduces the size of your concentrated position and creates a charitable deduction that can offset income in a high-compensation year. For executives facing a large vest or a significant option exercise, the timing of a donor-advised fund contribution can be particularly meaningful from a tax standpoint.
Using Tax-Loss Harvesting to Offset Gains
When selling a concentrated stock position generates a capital gain, tax-loss harvesting can be a useful tool for reducing the overall tax impact. The strategy involves selling other investments in your portfolio that have declined in value, realizing those losses intentionally, and using them to offset the gains generated from selling company stock.
For example, if you sell $200,000 worth of company stock and realize a $150,000 gain, and you also hold other positions in your portfolio that have declined by $50,000, selling those declining positions in the same tax year could reduce your net taxable gain to $100,000. The losses and gains offset each other before taxes are calculated.
This does not eliminate the tax bill entirely, but it can reduce it meaningfully in years when you are actively diversifying. It also creates an opportunity to reposition other parts of your portfolio at the same time, replacing sold positions with similar investments that maintain your desired allocation without running afoul of wash sale rules.
Tax-loss harvesting works best when it is coordinated as part of a broader plan rather than executed reactively at year end. The most effective approach is to review your full portfolio alongside your advisor and tax professional early in the year, identify positions that could be harvested strategically, and time those sales to work in concert with your concentrated stock diversification schedule.
The Coordination That Makes This Work
One of the most common patterns we see with executive clients is that the different pieces of their financial life are being managed separately, without anyone looking at the full picture. The equity plan is administered through HR. The tax return is filed by a CPA. The broader financial plan, if there is one, sits somewhere in between. When those conversations are not happening together, the opportunities that exist at the intersection of them go unnoticed.
A concentrated stock position does not exist on its own. It touches your income, your retirement accounts, your estate plan, your charitable giving, and your family’s long-term financial security. Addressing it well means looking at all of those pieces at the same time, not one at a time.
For our existing clients, this kind of coordination is something we build into the relationship from the beginning. We are not just managing a portfolio, we are tracking vesting schedules, flagging planning windows, and making sure that each equity event is handled in a way that fits into the larger plan.
For executives who have not yet had that kind of integrated conversation, that is exactly where we start. We take the time to understand the full picture such as the equity, the taxes, the goals and the family before making any recommendations.
At Brandywine Oak Private Wealth, our wealth advisors and in-house CPAs work together so that no piece of your financial life operates in a silo. We coordinate with your equity plan administrator and your legal team as needed, and we help you build a strategy that is realistic, tax-aware, and built around what matters most to your family.
If you are an executive with a concentrated stock position and have been wondering whether your current approach is as thoughtful as it could be, we would welcome the conversation. There is rarely one right answer, but there is almost always a better plan than the default. Call (484) 785-0050, email contact@BrandywineOak.com, or schedule a meeting online. You can also visit our client testimonials page to hear how we have helped other families navigate situations just like this one.
Frequently Asked Questions About Concentrated Stock Positions
What counts as a concentrated stock position?
There is no universal threshold, but a common rule of thumb among wealth advisors is that holding more than 10% to 15% of your total investable assets in a single stock represents meaningful concentration risk. For executives who also receive income, benefits, and future equity from the same company, the effective exposure can be even greater than the portfolio percentage alone suggests. At Brandywine Oak Private Wealth in Kennett Square, PA, we evaluate concentration not just as a portfolio percentage but in the context of a client’s complete financial picture.
How do I diversify a concentrated stock position without paying a large tax bill?
There is rarely a way to fully eliminate the tax impact of selling a significantly appreciated position, but there are strategies that can reduce and spread it over time. Systematic sales across multiple tax years, gifting appreciated shares to a donor-advised fund, and – in certain situations – tax loss harvesting can all play a role. The right approach depends on your cost basis, your income situation, your charitable goals, and your timeline. Working with a financial advisor and a tax professional in a coordinated way is important to finding a strategy that addresses both the investment and the tax dimensions.
Can I sell company stock while I am still employed there?
Yes, but executives at public companies are subject to trading restrictions that limit when sales can occur. Sales are generally permitted only during open trading windows that follow earnings releases and other scheduled events. Rule 10b5-1 plans offer a way to establish a pre-scheduled selling program in advance, which can allow sales to occur outside of traditional open windows once the plan is in place. Your company’s general counsel or equity plan administrator can clarify the specific rules that apply to your situation.
Should I hold my company stock after it vests or sell it right away?
The answer depends on your overall exposure to the company, your tax situation, and how much of your financial picture is already tied to the same employer. For executives who already have significant unvested equity, income, and benefits connected to one company, continuing to hold everything that vests adds more concentration rather than reducing it. A thoughtful selling approach, one that is built into your overall financial plan rather than decided in the moment, can help you make these decisions with clarity and consistency rather than reacting to how the stock is performing on any given day.
What role does estate planning play in managing a concentrated stock position?
Estate planning can be an important part of a comprehensive approach to concentrated stock, particularly for positions that have grown significantly from the original purchase price. In some cases, holding a position until death may allow heirs to inherit the stock at its current value rather than the original cost, which can reduce the tax owed when they eventually sell. Trusts and other estate planning tools can also help transfer a concentrated position in a more tax-efficient way. These decisions interact closely with your overall estate plan and should be evaluated together with your estate planning attorney and financial advisor. At Brandywine Oak, our team works alongside your legal professionals to make sure all of the pieces are aligned.
About Michael
Michael Henley is the Founder and CEO of Brandywine Oak Private Wealth, a private wealth management and registered independent advisory firm headquartered in Kennett Square, PA. Over the course of his 20-year career, Michael has been dedicated to helping wealthy individuals and families plan and manage all aspects of their finances and investments. With a passion for helping others look behind the curtain and understand the complex world of finance, he develops close relationships with clients as he helps them progress toward their financial goals. Michael loves to provide clarity and alleviate financial anxiety, help prevent families from overpaying in taxes, and give wealthy families permission to enjoy their life savings. He says, “No work is more gratifying than giving families outcomes to what matters most to them.”
Michael holds the CERTIFIED FINANCIAL PLANNER®, Certified Private Wealth Advisor®, Chartered Retirement Planning Counselor℠, and Retirement Management Advisor® designations. Residing in Chadds Ford, PA, with his two children, he enjoys outdoor activities, particularly maintaining trails on his property, hiking with his dogs, and being an actively engaged dad, always taking his kids everywhere. Michael’s latest hobby is tennis and he recently started ice skating to join his daughter Savannah. He can also be found moving logs to the firepit with his son Maverick on the tractor. Michael serves on the board of United Way of Southern Chester County and loves mentoring younger advisors. Great mentors helped him succeed, and he’s convinced that every leader needs to both have mentors and be a mentor. To learn more about Michael, connect with him on LinkedIn.
Brandywine Oak Private Wealth is a registered investment adviser. Registration does not imply a certain level of skill or training. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
