The Financial Advisor Advantage: How to Maximize Compensation and Workplace Benefits

By Nathan Lee, CFP®

With the start of a new year comes bonus season—a time to celebrate the fruits of last year’s hard work and embrace fresh opportunities. There's something exhilarating about seeing that bonus hit your account. It's a reminder of your accomplishments and a chance to make some strategic moves for the future.

As a financial advisor in the heart of the Big Apple, I’ve seen it all regarding compensation packages. From Wall Street bonuses that could impress the Monopoly banker to tech startup equity that might be the next golden ticket (or not), NYC is a playground of financial complexity.

When managing your compensation and workplace benefits, the stakes are high, especially for high-net-worth professionals. It’s a critical time to ensure you’re maximizing every aspect of your compensation package. Let’s explore how a skilled financial advisor can help you optimize your financial future.

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Understanding Equity Compensation Plans

For many NYC professionals, equity compensation plans are a substantial part of their overall earnings. These plans often include Restricted Stock Units (RSUs), stock options, or performance shares. While these benefits can offer immense value, they also require careful planning to avoid costly mistakes.

Vested and Non-Vested Shares

If you’re holding RSUs, your plan likely includes both vested and non-vested shares. Vested shares are yours outright, while non-vested shares are essentially promises tied to your continued employment or performance goals. The timing of when shares vest can have significant tax implications, so understanding this timeline is critical.

For example, you may receive an initial grant of 400 RSUs. Instead of vesting all at once, the vesting schedule might vest in “tranches” like this:

• Year 1: 100 RSUs vest (first tranche)

• Year 2: 100 RSUs vest (second tranche)

• Year 3: 100 RSUs vest (third tranche)

• Year 4: 100 RSUs vest (final tranche)

But it can become more complex if the company gives new RSU grants each year. This can create overlapping tranches:

• In 2024, you get 400 RSUs vesting over 4 years

• In 2025, you get another 400 RSUs vesting over 4 years

Now, you have multiple tranches vesting simultaneously, each with tax implications, timing considerations, and potential impact on your overall financial strategy.

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Why Diversification Matters

One of the first questions I ask clients with a significant amount of company stock is, “Would you own this much of this stock if you didn’t work here?” If the answer is no, it’s time to diversify. Relying too heavily on a single stock—even your employer’s—can expose you to unnecessary

risk. Diversifying your portfolio ensures you're not overexposed to a single company's performance fluctuations.

Your company isn't going to diversify for you—that's a decision you need to make actively. And while new tranches of RSUs will keep coming your way (maintaining your upside potential), holding too much company stock is like putting all your eggs in one very familiar basket.

For example, I once worked with a client who held 75% of their portfolio in employer stock. While the company had a strong track record, unexpected market turbulence left them scrambling to rebalance their investments. By gradually diversifying their holdings, we were able to stabilize their portfolio.

Strategies for Managing Equity Compensation

Effectively managing equity compensation requires a thoughtful approach. Here are some key strategies to help you make the most of your benefits:

• Automated Sales Plans: Setting up a 10b5-1 plan allows you to systematically sell shares over time, reducing emotional decision-making.

• Tax-Optimized Sales: Selling vested shares strategically, such as in low-income years, can reduce the tax burden.

• Reinvesting Proceeds: The proceeds from your sales can be redirected into a diversified portfolio tailored to your financial goals.

Additionally, it’s wise to revisit your strategy periodically. Life events such as a job change, a promotion, or even personal milestones such as buying a home may warrant adjustments to your approach. A financial advisor can provide tailored recommendations to keep you on track.

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Tax Planning for High-Net-Worth Individuals

If you’re an NYC professional earning a substantial income, taxes are likely one of your most significant expenses. Yes, it’s essential to comply with the tax laws, but you can also use the tax code to your advantage. A financial advisor can help you implement the best tax strategies for your situation.

Mitigating Taxes on RSUs and Stock Options

When your RSUs vest, they are considered taxable income. Any appreciation is taxed as capital gains if you sell those shares later. Planning when and how to sell is essential for minimizing taxes. Without proper planning, it could lead to a cash flow crunch or forced selling at inopportune times. This is where strategic tax planning makes all the difference.

• Short-Term vs. Long-Term Gains: Holding shares for at least a year post-vesting can qualify you for lower long-term capital gains rates.

• Tax-Loss Harvesting: If some investments in your portfolio decline in value, selling them can offset gains from your equity compensation.

Other Tax Strategies

• Leveraging deductions like charitable contributions or investment interest expenses can reduce taxable income.
• Maxing out 401(k) and backdoor Roth IRA contributions can lower taxable income while boosting long-term savings.
• Coordination with other income sources is crucial because the timing of when you receive various types of income (like bonuses, RSUs, and investment gains) can significantly impact your tax bracket and overall tax burden. Proper planning could save thousands of dollars.

Another overlooked tax-saving tool for NYC professionals is Donor-Advised Funds (DAFs). These funds allow you to make a charitable contribution in one year, claim the tax deduction immediately, and distribute the money to charities over time. This is particularly useful for high-income years when tax savings are most valuable.

Also, planning for Alternative Minimum Tax (AMT) is critical to avoid surprise tax bills that could impact your cash flow and investment strategies. AMT is a parallel tax system that calculates your tax liability regardless of your exemptions, credits, or deductions. It ensures high-income earners pay at least a minimum level of tax.

For professionals who receive Incentive Stock Options (ISOs), careful attention to AMT thresholds can prevent unexpected liabilities. Exercising ISOs strategically by spreading them out over several years can reduce the risk of crossing the AMT trigger point.

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Compensation Planning: Beyond the Paycheck

While salary is important, true wealth-building comes from leveraging all aspects of your compensation package—bonuses, deferred compensation, and workplace benefits. A financial advisor can help you look at all the options for your compensation package.

Bonuses

Many NYC professionals receive hefty year-end bonuses. But before you spend it, consider:

• Pre-Tax Contributions: Allocate part of your bonus to your retirement accounts or Health Savings Account (HSA) to reduce your taxable income.

• Debt Management: If you’ve accumulated credit card debt, using a portion of your bonus to pay it down can provide peace of mind and free up additional funds for future investments.

Deferred Compensation

Deferred compensation plans let you push part of your income into future years, reducing your current tax liability. However, they come with risks (e.g., company bankruptcy), so they’re best used in conjunction with a well-diversified portfolio.

One key strategy is aligning deferred compensation withdrawals with years when your income might be lower, such as early retirement. This allows you to capitalize on lower tax brackets and keep more of your earnings.

We can help you understand the pros and cons and how deferred compensation fits into your overall financial picture.

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Workplace Benefits

It’s easy to overlook workplace benefits, but they often include features that can significantly boost your financial health. A financial advisor can help you identify and leverage these opportunities to align with your financial goals.

Retirement Plans

Maximizing your contributions to employer-sponsored retirement plans is a no-brainer. Beyond the obvious tax benefits, some companies offer matching contributions that are essentially free money.

Additionally, NYC professionals with access to non-qualified retirement plans, such as Supplemental Executive Retirement Plans (SERPs), can use these tools to build tax-deferred savings beyond the IRS limits for 401(k) plans.

Health and Wellness Perks

NYC companies often provide benefits like gym memberships, mental health resources, and Health Savings Accounts (HSAs). Taking full advantage of these perks can reduce your out-of-pocket expenses and improve your quality of life.

One example is leveraging your HSA not only for medical expenses but also as a long-term savings vehicle. Many professionals don’t realize that unused HSA funds can be invested, growing tax-free for retirement healthcare expenses. Pairing this strategy with high-deductible health plans can maximize immediate savings and future financial security.

Wellness perks like gym memberships or transit benefits can also have hidden financial advantages. For instance, utilizing a commuter benefits program to cover subway or train fares with pre-tax dollars can lead to meaningful annual savings in a city where transportation costs add up quickly. These seemingly small benefits can add up, especially in a high-cost city like New York.

Insurance Options

Many employers offer group life, disability, and long-term care insurance. These options are often more affordable than individual policies, making them a valuable part of your financial plan.

However, it’s essential to review the coverage limits. Many group plans offer basic coverage, which may not be sufficient for high-income earners. Supplementing with individual policies can fill in the gaps and ensure your family is fully protected.

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NYC Financial Planning: Tailored to Your Life

Financial planning in NYC comes with unique challenges, but it also presents significant opportunities. From managing high living costs to leveraging unique compensation structures, having a tailored approach is critical to achieving financial success in the city that never sleeps. As a financial advisor, I’ve seen how a comprehensive plan can help clients thrive.

Budgeting in NYC

Living in New York often means balancing high expenses with ambitious financial goals. Start by creating a realistic budget that accounts for major categories like housing, transportation, dining, and entertainment. While it’s important to enjoy the perks of city living, prioritizing savings and investments ensures you’re building long-term financial security.

If your monthly rent consumes a significant portion of your income, consider ways to offset costs, such as negotiating lease terms or exploring tax benefits if you work from home.

Another NYC-specific consideration is understanding the impact of housing costs on your net worth. While homeownership in the city can feel unattainable, there are creative strategies like co-ops, shared ownership arrangements, or even investing in out-of-state real estate as a wealth-building tool.

When budgeting in NYC, don’t overlook recurring costs that often go unnoticed—like subscription services, delivery fees, or even frequent rideshare usage. These small expenses can add up quickly and eat into your financial goals. A “subscription audit” every six months can free up hundreds of dollars that can be redirected to savings or investments.

Tools like cash flow tracking apps and automated savings plans can simplify the budgeting process. A financial advisor in NYC can also provide valuable insights into how to align your spending with your larger goals.

Building a Safety Net

In a city where unexpected expenses are the norm, building an emergency fund is non-negotiable. Aim to set aside three to six months’ of living expenses in a high-yield savings account. This safety net not only provides peace of mind but also prevents you from relying on credit cards or dipping into long-term investments when surprises arise.

NYC professionals often find it helpful to maintain an additional “opportunity fund.” This is separate from your emergency savings and can be used for unexpected investment opportunities or career changes.

Managing Credit Card Debt

Credit card debt has become more common among high-income professionals, particularly as they navigate the city’s demanding lifestyle. Paying off debt is essential, but it’s equally important to do so strategically. A financial advisor can help you prioritize high-interest debt while considering options like refinancing or consolidating debt to lower rates.

Navigating Unique Financial Opportunities

NYC offers opportunities that professionals in other regions may not encounter. For instance, access to IPOs, unique investment opportunities, or high-earning equity compensation packages can significantly boost wealth if managed correctly.

One often overlooked opportunity is investing in private placements or venture capital funds. When approached strategically and with professional guidance, these high-risk, high-reward investments can complement a diversified portfolio.

A financial advisor can help identify and capitalize on these opportunities while ensuring they align with your risk tolerance and long-term strategy.

Tax Efficiency

It’s no surprise to you that New York’s state and city taxes are among the highest in the nation, making tax efficiency a cornerstone of financial planning. Working with an advisor ensures you’re taking advantage of every deduction and credit available to you.

Planning for the Future

From saving for your children’s education to planning for retirement, a comprehensive financial strategy should address both immediate and long-term goals. In NYC, the cost of private education, housing upgrades, and lifestyle inflation can be significant. A financial advisor can help you anticipate these costs and prepare accordingly, so you’re never caught off guard.

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Lessons from the Trenches

Over the years, working with countless clients, I’ve gained invaluable insights into what it takes to achieve lasting financial success. These lessons aren’t just abstract concepts but are rooted in real-life experiences and practical applications.

In my years as a financial advisor, I’ve learned a few key lessons:

• Anything Worth Doing is Hard: Whether it’s sticking to a budget, negotiating a raise, or planning for retirement, the most rewarding financial achievements often require effort and discipline. The satisfaction of overcoming these challenges makes the rewards even sweeter.

• Knowledge is Power: Understanding your compensation and benefits is the first step to optimizing them. Don’t be afraid to ask questions, seek clarification, and invest time in learning the nuances. The more informed you are, the better equipped you’ll be to make decisions that align with your goals.

• Calculated Risks Can Pay Off: When you have a solid understanding of your financial situation, you can make informed decisions about when to play it safe and when to take a chance. For example, investing in a startup opportunity or diversifying out of concentrated stock positions can yield significant rewards when done strategically.

These lessons aren’t just theories—they’re principles that I’ve seen work time and again for clients who commit to the process and take control of their financial future.

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The Power of Professional Guidance

In today's complex financial landscape, having a knowledgeable guide and personalized advice can make all the difference. At Servet Wealth, we specialize in helping ultra-high-net-worth professionals in NYC. We understand your unique challenges and opportunities and are committed to helping you optimize every aspect of your financial life.

From navigating intricate compensation packages to crafting tax-efficient strategies, our team knows that the details matter. We work alongside you to uncover opportunities, mitigate risks, and ensure every dollar you earn is working toward your broader vision of success.

Don't let another bonus season pass without having a solid strategy in place. At Servet Wealth Management, our team of experienced advisors can provide the guidance and expertise you need to optimize your compensation, manage your investments, and achieve your financial goals.

We take pride in offering more than just financial advice. We want to be your partner in building the future you’ve envisioned. Whether it’s planning for retirement, managing equity compensation, or preparing for major life transitions, our comprehensive approach is designed to help you stay ahead in every phase of life.

Your financial goals are as unique as your career and lifestyle, which is why cookie-cutter advice simply won’t do. With a tailored strategy, backed by years of experience and deep expertise in serving NYC’s top professionals, you can move forward with clarity and confidence.

To see if we can help you maximize your compensation and benefits and build a financial plan that aligns with your unique goals, click here to schedule a conversation today. Let’s transform your hard-earned success into lasting wealth—and the freedom to enjoy it.

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