Adding Stock Plans to a Client's Profile
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.
Adding stock plans overview (video)
Adding stock plans overview
To add a Stock Plan, navigate to the client, select Profile > Net Worth, click on 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 Models > Vesting from the main advisor portal. Any schedules set up there will be available under the drop-down box.
Vest at separation: If any unvested options should automatically vest at retirement and/or death, indicate as such using the drop-down box.
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 in the year specified
Click on Add a Grant 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, 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 that was indicated previously.
Understanding cash flow details (video)
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.
- 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.