Author: Hazel Secco, CFP®, CDFA®
Estimated reading time: 14 minutes
Table of contents
- What does a financial advisor for equity compensation actually do differently?
- The four equity types and the trap inside each
- How does the 22% RSU withholding gap work in practice?
- A hypothetical composite: the director with $900K in company stock
- Should I sell RSUs as they vest?
- What is a 10b5-1 plan, and does your advisor coordinate with it?
- How is your advisor paid on the stock she does not manage?
- What to Do This Week
- Frequently Asked Questions
- Should I sell my RSUs as soon as they vest?
- What is a 10b5-1 plan?
- How do I diversify concentrated stock tax-efficiently?
- What should a financial advisor know about equity compensation?
- How Align handles vest dates
- Want the full picture?
- Sources
“My RSUs vest in November. I’ve got about $900K in company stock already, I know I should be selling some of it, and every April I owe more than I expected. I’m interviewing advisors and I can’t tell which ones actually understand this.” That is how the women who call me describe the problem. The search that brought you here, financial advisor equity compensation, is usually typed after a tax bill, a vest date, or both.
Here is what changes when the equity is handled as a system. The April bill stops being a surprise, because the gap between what your employer withholds and what you owe is estimated in advance and paid on schedule. Your company stock stops drifting upward as a share of your net worth, because a sell-down schedule runs on the calendar, inside your trading windows, with the tax cost of each sale known before it happens. And your option exercises get timed against the alternative minimum tax rather than discovered by it.
That is the outcome. The rest of this post is about how to tell whether an advisor can deliver it. I am a CFP® and fee-only fiduciary, and the questions below are the ones that separate an advisor who plans around your stock from one who manages everything except the asset that matters most.
What does a financial advisor for equity compensation actually do differently?
A financial advisor who understands equity compensation builds three things before your next vest date: a withholding gap estimate for the tax year, a written concentration ceiling with a sell-down schedule, and an exercise plan for any options that models the alternative minimum tax. Everything else (investments, retirement projections, insurance) sits on top of those three.
Most advisors can describe RSUs. Far fewer will ask for your grant agreements, your company’s insider trading policy, and last year’s W-2 in the first meeting. Those three documents are where the planning happens. When $900,000 of a $2.1 million portfolio is one ticker, the quality of the sell-down plan matters more than the quality of the fund lineup, and I wrote about why that single position is so hard to let go of in Home Stock Syndrome.
The four equity types and the trap inside each
RSUs, ISOs, NQSOs, and ESPPs are taxed on different events, withheld on different rules, and reported in different places. An advisor who treats them as interchangeable “stock comp” will miss at least one of the four traps in the table below. Use the last column as an interview script.
| Equity type (2026 rules) | Taxable event | The withholding trap | Question to ask an advisor |
|---|---|---|---|
| RSU (restricted stock unit) | Ordinary income on the full market value at vest | Employer withholds federal income tax at a flat 22% on supplemental wages up to $1 million for the year (37% above), while your marginal rate may be 32%, 35%, or 37% | “How do you estimate and pay the gap between 22% withholding and my actual bracket, and when?” |
| ISO (incentive stock option) | No regular tax at exercise if held; the spread at exercise is an AMT preference item | Nothing is withheld at exercise, so the AMT bill arrives the following April with no cash set aside | “Do you model AMT before I exercise, and how do you decide how many ISOs to exercise in a year?” |
| NQSO (non-qualified stock option) | Ordinary income on the spread at exercise | Same 22% supplemental withholding on the spread, same gap to your real bracket | “Do you plan NQSO exercises around brackets, or just around expiration dates?” |
| ESPP (employee stock purchase plan, Section 423) | Ordinary income on some or all of the discount at sale; holding period determines how much | No withholding at purchase or sale; the discount shows up on your W-2 only after a disposition | “Do you track my ESPP lots by purchase date and holding period, and who reports the ordinary income piece?” |
Two definitions so the table stands on its own. Supplemental wages are payments outside regular salary; the IRS lets employers withhold federal income tax on them at a flat 22% (Publication 15, for use in 2026), rising to a mandatory 37% once supplemental wages for the year exceed $1 million. RSU vests and NQSO spreads are both supplemental wages. The alternative minimum tax, or AMT, is a parallel tax calculation; for 2026 the exemption is $90,100 for single filers and $140,200 for joint filers, phasing out above $500,000 and $1,000,000 of alternative minimum taxable income respectively (Rev. Proc. 2025-32). An ISO exercise adds the spread to that calculation even though it adds nothing to regular taxable income. If ISOs are your main grant type, read Understanding AMT: What Women Leaders with ISOs Need to Know.
How does the 22% RSU withholding gap work in practice?
The gap is the difference between the flat 22% your employer withholds on an RSU vest and the marginal rate that vest income is actually taxed at on your return. For a 2026 single filer whose salary already puts her past $256,225 of taxable income, each vest dollar is taxed at 35%, so 13 cents of every vested dollar goes unpaid until April.
Payroll does not know your other income, your spouse’s income, or your investment income. It applies 22% because Publication 15 allows it, and it moves to 37% only once your supplemental wages for the year pass $1 million. In the 37% bracket (taxable income above $640,600 for a single filer in 2026), the gap is 15 points.
I see the same pattern every spring: the vest looked like a windfall in November, the shares were held, and the tax on the November value is due regardless of what the shares are worth in April. I wrote up the full failure mode in the RSU tax withholding mistake. The fix is a year-ahead estimate, funded by selling enough shares at vest or by quarterly estimated payments, and it is one of the first deliverables an RSU financial advisor should produce for you.
A hypothetical composite: the director with $900K in company stock
This example is a hypothetical composite, built to show the arithmetic. It is not a client, and it assumes nothing about where the stock goes.
Dana is a division director, single filer, with a $2.1 million investable portfolio. $900,000 of it is vested company stock, and $180,000 more vests each year. Her salary and bonus already put her 2026 taxable income above $256,225, so the entire $180,000 vest falls in the 35% federal bracket for a single filer.
The withholding gap. Payroll withholds 22% of $180,000, which is $39,600. Federal tax on that income at her 35% marginal rate is $63,000. The unpaid difference is $23,400 of federal income tax on the vest alone, before state tax. If Dana holds the shares, that $23,400 comes from cash in April. If she sells at vest, the sale creates little or no additional gain, because her cost basis is the vest-date value, and the proceeds cover the gap with room to spare.
The concentration. Today, company stock is $900,000 of $2.1 million, or 42.9% of her portfolio. Holding prices flat purely to isolate the arithmetic (a simplification, not a forecast), one more year of holding every vest takes her to $1,080,000 of $2,280,000, or 47.4%. Nothing has to go wrong for the problem to get worse.
Now the plan. Dana and her advisor set a concentration ceiling of 15% and a three-year schedule: sell every new vest on its vest date, and sell $200,000 of legacy shares each year inside open trading windows, with the capital gains tax on each legacy lot estimated before the sale.
| Year (prices held flat for arithmetic only) | Company stock | Total portfolio | Concentration |
|---|---|---|---|
| Today | $900,000 | $2,100,000 | 42.9% |
| End of year 1 | $700,000 | $2,280,000 | 30.7% |
| End of year 2 | $500,000 | $2,460,000 | 20.3% |
| End of year 3 | $300,000 | $2,640,000 | 11.4% |
By the end of year 3 she is under her ceiling, the annual vests never accumulate, and each April’s bill was estimated the previous November. For the decision framework behind sell-versus-hold, see Should You Sell or Hold? Crafting a Plan for Vested RSUs.
Should I sell RSUs as they vest?
For most executives, yes: selling RSUs at vest costs almost nothing in additional tax, because your cost basis equals the vest-date value, and it stops your concentrated stock position from growing on autopilot. The case for holding is an investment decision about one company, and it should be made deliberately against a written ceiling.
The question to put to an advisor is how she would structure the sale. A director, officer, or anyone with regular access to material nonpublic information usually cannot sell whenever she likes. She sells inside open windows, or under a plan adopted in advance. An advisor who builds a sell-down schedule without asking for your company’s insider trading policy has built a schedule you cannot execute.
Ask also how she handles the legacy shares, the ones with a low basis. The order in which lots are sold, the years they are sold in, and whether some are given rather than sold all change the tax cost. Appreciated company stock is often the best asset to give, which I covered in Giving Stock to Charity.
What is a 10b5-1 plan, and does your advisor coordinate with it?
A 10b5-1 plan is a written, pre-arranged trading plan adopted under SEC Rule 10b5-1 that lets an insider sell company stock on a schedule set in advance, providing an affirmative defense to insider trading liability as long as the plan was adopted in good faith and while she had no material nonpublic information. For an executive, it is the tool that turns a sell-down schedule into trades that actually happen.
The SEC tightened the rule in December 2022. Directors and officers now face a cooling-off period before the first trade: 90 days after adopting or modifying the plan, or two business days after the company discloses financial results for that quarter, whichever is later, capped at 120 days. They must also certify in the plan that they hold no material nonpublic information and are adopting it in good faith. Overlapping plans are restricted, and single-trade plans are limited to one per twelve-month period.
For your advisor interview, the plan’s share counts and price limits should come from your financial plan rather than from a template your company’s broker hands you. Ask, “Will you work with my company’s plan administrator to set the amounts and dates, and will the plan match the concentration ceiling we agreed on?” If the advisor treats the 10b5-1 plan as your company’s business, she is not coordinating the most important sale schedule in your portfolio.
How is your advisor paid on the stock she does not manage?
A fee-only advisor is paid only by you, never by commissions or product sales. For equity compensation that distinction has a specific consequence: your company stock usually sits in a plan account at your employer’s broker, outside the advisor’s custody. Ask directly whether she plans around those shares at no extra charge, bills on them, or ignores them.
An advisor who bills only on assets she custodies has an incentive to move the shares quickly, which can be premature depending on your windows and your tax picture. You should know which structure you are hiring. I laid out the three models in how financial advisors are compensated.
Our wealth management work and our approach for women with significant assets and complex compensation both start from the equity and build outward. The tax side, including how vest income interacts with Roth conversions later, is in the Retirement Tax Playbook.
What to Do This Week
Pull last year’s W-2 and your final paystub and find the supplemental withholding line. If the withholding on your vest income was 22% and your 2025 bracket was 32% or higher, you have a gap to fund for 2026.
Calculate your concentration percentage. Company stock (vested shares, ESPP shares, and in-the-money options at their spread) divided by total investable assets. If it is above 20%, the sell-down schedule is the first conversation to have with any advisor you interview.
Request your company’s insider trading policy and the next open-window dates. Bring both to any advisor meeting. An advisor who can build a schedule around them is doing the job.
If you hold ISOs, ask your CPA for a 2026 AMT projection before exercising anything. The number of shares you can exercise without triggering AMT is knowable in advance.
Schedule the gap payment. Adjust your W-4 for extra withholding, sell enough shares at vest to cover the true rate, or set up quarterly estimated payments. Pick one and put the date on the calendar.
Frequently Asked Questions
Should I sell my RSUs as soon as they vest?
In most cases, yes. RSUs are taxed as ordinary income at vest whether you sell or hold, and your cost basis is set at the vest-date value, so an immediate sale creates little or no additional tax. Holding is a decision to invest your after-tax bonus in one stock. Make it deliberately against a written concentration ceiling, inside your company’s trading windows or under a 10b5-1 plan.
What is a 10b5-1 plan?
A 10b5-1 plan is a pre-arranged written trading plan under SEC Rule 10b5-1 that lets an insider buy or sell company stock on a fixed schedule, providing an affirmative defense to insider trading claims. Since the SEC’s December 2022 amendments, directors and officers face a cooling-off period of at least 90 days (up to 120) before the first trade and must certify they hold no material nonpublic information when adopting it.
How do I diversify concentrated stock tax-efficiently?
Sell newly vested shares at vest, where the tax cost is close to zero. For older, low-basis shares, set an annual dollar target, sell specific lots to manage the gain, and spread sales across tax years so no single year lands in a higher bracket. Gifting appreciated shares to charity or a donor-advised fund removes the gain entirely. Time each sale against your trading windows and that year’s marginal rate.
What should a financial advisor know about equity compensation?
At minimum: how RSUs, ISOs, NQSOs, and ESPPs are each taxed and withheld; that 22% supplemental withholding under-withholds for anyone in the 32% bracket or higher; how to model AMT on ISO exercises; how insider trading windows and 10b5-1 plans constrain your sales; and how to set and reach a concentration ceiling. If she does not ask for your grant agreements in the first meeting, keep interviewing.
How Align handles vest dates
At Align, equity compensation is built into the plan from the first meeting. Your Wealth Blueprint™ includes the concentration ceiling, the sell-down schedule, and the withholding gap estimate for the current tax year, and the Annual Rhythm that follows puts your vest dates, trading windows, and estimated payment deadlines on our calendar, so the planning happens before the vest. Align360™ Wealth Management is how we deliver that, as a CFP® and fee-only fiduciary, for executive women whose company stock is the largest line on the balance sheet.
Want the full picture?
If you want the complete breakdown, including the three advisor compensation models, why tax preparation isn’t tax planning, and the four questions every high-earner should ask her advisor, download my free guide, 7 Things Nobody Teaches Independent Women About Building Wealth (https://alignfinancialsolutions.com). It’s a 15-minute read.
Hazel Secco, CFP®, CDFA®, is the founder of Align Financial Solutions, a fee-only fiduciary firm that works with executive women on retirement planning, equity compensation, and tax strategy.
Book a free 15-minute Align Call: https://alignfinancialsolutions.com/book-a-call/
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https://alignfinancialsolutions.com · https://www.youtube.com/@AlignYourRetirement · https://linkedin.com/in/hazel-secco
Disclaimer: Advisory services are offered through Align Financial Solutions LLC (“AFS”), an Investment Advisor in the State of New Jersey. This article is for educational purposes only and does not constitute personalized tax, legal, investment, or financial planning advice. Rules and figures are current for 2026 and subject to change. All client scenarios are hypothetical composites for illustration and do not represent any specific client outcome. Consult a qualified professional about your specific situation.
Sources
- Internal Revenue Service, Publication 15 (Circular E), Employer’s Tax Guide, for use in 2026, Section 7 (supplemental wages: 22% flat rate; 37% mandatory rate above $1 million): https://www.irs.gov/publications/p15
- Internal Revenue Service, Rev. Proc. 2025-32 (2026 inflation adjustments: income tax rate tables, AMT exemption amounts and phase-out thresholds): https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
- U.S. Securities and Exchange Commission, Insider Trading Arrangements and Related Disclosures, final rule (December 2022 amendments to Rule 10b5-1): https://www.sec.gov/rules-regulations/2022/12/insider-trading-arrangements-related-disclosures
- U.S. Securities and Exchange Commission, press release 2022-222, SEC Adopts Amendments to Modernize Rule 10b5-1 Insider Trading Plans and Related Disclosures: https://www.sec.gov/newsroom/press-releases/2022-222
- U.S. Securities and Exchange Commission, Fact Sheet, Rule 10b5-1 and Insider Trading (cooling-off periods): https://www.sec.gov/files/33-11138-fact-sheet.pdf
- 26 U.S. Code § 423, Employee stock purchase plans (Legal Information Institute, Cornell Law School): https://www.law.cornell.edu/uscode/text/26/423