Transitioning to a new career opportunity can be a time of excitement and anticipation, but it also calls for a clear and rational focus on the financial implications. Changing jobs has become far more common today than in the past, particularly in vibrant and volatile sectors. It is not uncommon for some of our mid-career clients in the technology sector, for example, to have had half a dozen or more jobs in their career. Typically these transitions result in a myriad of questions about best practices for optimizing financial outcomes. More often than not, a series of job changes result in a tangled and disjointed financial picture without any clear direction.
Here are a few ways we work with clients who have either had frequent job changes in the past, or are vetting a new opportunity.
Minimize the Money You Leave on the Table; Timing a Move:
For clients considering a career move, we review their current employer’s equity awards, RSUs, EESPs, and vesting schedules to determine how to best time a job change to minimize the assets left behind.
Build Understanding of New Employer’s Incentives:
We work with clients to ascertain the value of the new company’s incentives such as equity awards, as well as the amount of compensation in the form of stock, how the equity is valued if private, vesting schedules, along with a variety of other issues. We look at the historical performance of the company’s equity over time and in different economic environments, and model a range of future outcomes and the resulting financial impact on the client. We help clients have an unbiased and rational view of the potential performance of these incentives, and not to make an employment decision based on excessively optimistic expectations.
Assess Client Asset Concentration, and Determine Options:
On the plus side, most of the wealthiest people in the US became so through massive net worth concentration in a hyper successful business. On the other hand, there are numerous examples of formerly high-flying companies which suffered a stupendous collapse in value, taking their employees net worth, and often their income prospects, with them. For every employee of Google who never sold a share of stock, there are many times the number who had a very different outcome who worked at AIG, or Bank of America, or GE.
Senior employees tend to have considerable concentration of their net worth in their employers’ equity, as well as their income and benefits. This presents opportunity, but also considerable risk. Senior employees tend to have a strong belief in the prospects for their company’s financial performance, understand the asset, and value the perceived control they feel they have over the company’s direction and outcomes.
We assess client’s overall net worth and asset composition and concentration, and typically advise a cautious approach to expectations, and the benefits of taking advantage of liquidity and diversifying.
Organization, Simplification: Converting old 401ks/Advising on new 401K:
It’s very common for new clients to have 401ks scattered at former employers. We work to consolidate and rationalize their financial accounts. Typically, clients have little idea of fees, performance or allocation of these very important tax-deferred vehicles.
We advise on the options for converting these 401Ks, typically to a lower cost IRA with a much wider range of investment options. We study the new employer's 401K plan and determine how to maximize and time contributions along with the company match. We educate clients on the importance of tax free compounding, project long-term outcomes, and how to best structure the asset allocation to their unique situation.
Maximize New Company’s Benefits:
Finally, we dive into the new employer’s range of benefits. From health insurance options, to flex spending and HSA accounts, to company subsidized life and disability, we advise the client on how to best utilize these to fit their life, and whether to augment them with non-employer options.
Had a series of job changes, or considering one? Are you focused on your finances, and trying to understand all the financial ramifications of what a change could mean? This is a perfect time to work with an advisor who will assist you through the entire process, and make sure every base is covered. Start your next chapter on the front foot, confident in your choices and decisions, and ready to attack the new opportunity with confidence and clarity.
Schedule a call with us today: