Stock Plans

Adding Stock Plans To a Client's Net Worth

RightCapital enables you to capture every element of a client's financial landscape — even nebulous elements like vesting stock plans, private stock, and unqualified stock options.

Add information about a client's un-exercised stock options, restricted stock units, or restricted stock by adding stock plans on the client's Profile > Net Worth screen. If options have been exercised or stock has vested, enter the shares/value directly in an investment account.

If you're looking for an overview of our dedicated Stock Plans Module, click here.

Adding Stock Plans Overview

To add a Stock Plan, navigate to the client, select Profile > Net Worth (or Step 4 of the six steps of data entry), and click Add Account > Stock Plan.

The information in the gray box is global information that will apply to all grants within the Stock Plan. To have one grant operate under different parameters, check Customized Strategy once a grant has been added to the stock plan.

Stock plan name: Name the stock plan whatever you like.

Stock: Choose between Private stock and Symbol. If the stock is for a non-publicly traded company, select Private stock to enter the current price. If it is a publicly-traded company, select 'Symbol' in the drop-down box to enter a ticker symbol, and RightCapital will retrieve the current price:

Stock return: Set the return assumption used when projecting the stock value. If an asset class is selected, RightCapital will use the assumed returns for that asset class as specified in Assumptions. If 'Flat return' is selected, enter in a specific assumed rate of return:

Vesting schedule: Specify the vesting schedule for any stock options. Choose from the default vesting schedules or set up a specific vesting schedule under Planning > Models > Vesting from the main advisor portal. Any schedules set up there will be available under the drop-down box. For more information on default and custom vesting schedules click here.

Vest at separation: This setting will adjust the treatment of unvested shares at retirement and/or death. The options to choose from are:

Retirement/Death: When selected, all unvested shares will vest at the first of retirement or death. This setting provides additional flexibility when adjusting the planning horizon or retirement age.
Retirement: When selected, all unvested shares will vest in the year of retirement
Death: When selected unvested shares will vest in the year of death
None: When selected all unvested shares will stop vesting after the client’s retirement. Unvested shares after retirement will be ignored within the financial plan.

Additionally, specify exercise and liquidation strategies. By default, these will apply to all grants within the stock plan unless a different strategy is specified under the individual grant.

Exercise strategy: The options are:

Exercise upon vesting, starting now: options will be exercised as they vest
Exercise upon expiry, starting now: options will be exercised on the expiry date
Start year and at vested: options will be exercised at the later of the year specified or the vesting date
Start year and at expiry: options will be exercised at the later of the year specified or the expiration date

Liquidation strategy: The options are:

Liquidate upon exercise: Stock will be liquidated on the exercise date
Liquidate one year after exercise: Stock will be liquidated one year after the exercise date
Liquidate at specific year: Stock will be liquidated starting in the year specified. Depending on the Liquidation Option selected, stock can be liquidated all in one year, or over a number of years.

Cashless exercise: When checked, the cashless exercise box automatically sells a specific number of shares to cover the cost of exercise within the financial plan. Cashless exercise strategies will only impact ISO & NQO grant types.

Adding Grants

Click on the Grant tab to enter information about a specific grant, and reflect the following information.

Grant Date: The date the grant was / will be made. Enter either past or future dates.

Grant Type: The options are:

ISO (Incentive stock options)
NQO (Non-qualified stock options)
RSU (Restricted stock units)
RS (Restricted stock)

83(b) election: For restricted stock or non-qualified stock options, specify whether the client has or will make an 83(b) election to pay taxes on the options up front.

Shares granted: Specify the initial number of shares granted.

Strike price: For options, indicate the price at which the client is able to exercise the option.

Expire in months: For options, indicate the number of months (from the initial grant date) after which the option will expire.

Shares exercised: For options, if shares have already been exercised but not liquidated, indicate the number of exercised shares here.

Customized strategy: Check the box to indicate a different exercise and/or liquidation strategy from the default strategy indicated in the stock plan data card above.

Shares Held: This value represents the number of shares that had previously vested and were exercised but which were held within the stock plan. These shares will be included in liquidation strategy.

You can also copy/delete a stock plan by selecting the 3 dots icon to the right of each grant:

Upload Grants

Stock grants can also be uploaded by selecting the down arrow next to the "Add Grant" option:

Here, you can upload a CSV file that can import grant information automatically. Once uploaded, you will be able to review/fix any possible missing information or errors prior to uploading.

Understanding Cash Flow Details

To evaluate the impact of stock plans on a client's assets, advisors look to the future cash flow projections within the Retirement > Cash Flows > Options Tab. In this area advisors can view specific grants as they vest, exercise & liquidate based on schedules set within the Profile > Net Worth area.

The income associated with liquidating a grant can analyzed within the Retirement > Cash Flows > Summary Tab. Advisors can click the Other Inflows column to reveal income generated from liquidating Options and RSU's. Advisors also use the Retirement > Cash Flows > Summary area to to determine whether the income is being used fund outflows or whether it is being saved and reinvested within the financial plan.

Summary of Taxation

Alternative Minimum Tax: AMT is automatically factored into financial plans that include stock options, including ISO's. AMT can be viewed within the Tax > Tax Estimate > Details Tab, by choosing the dropdown menu on the left and selecting the Alternative Minimum Tax form.

Misc

See the impact of the stock plans on the Retirement > Cash Flows screen by clicking on the Options tab.
Only the net value of vested but unexercised stock will be reflected in the client's current Net Worth.
Shares that vest before the first year in the cash flows will not be reflected since they are previously exercised and included in the Net Worth.