0 result

When should you hire a financial advisor?

Copy link

It can be difficult to decide the right time to hire a financial advisor. Should you do it while you’re still focused on putting your money into savings? Or do you wait until you have tens of thousands in the bank, and have disposable income available?

Consider the context of hiring an accountant. There was probably a time in your life when your taxes were simple, and you filed them on your own. Then you got married and hired a tax preparer to handle the added complexity of a two-income tax return. Then you bought a house, made some big investments, and hired a CPA to advise you on how best to be tax-efficient.

The same goes for working with a financial advisor. At certain inflection points, it makes sense to bring in outside help. One of those inflection points is when you’re granted employee stock options.

If you find yourself asking the following questions, an advisor can help:

  • Should I exercise my stock options?
  • When should I exercise?
  • How do I minimize my tax burden if I do decide to exercise?
  • What do I need to do if I think my company is going to IPO, or get acquired?
  • My company is in the process of going through an acquisition/IPO. When should I sell my shares?
  • How many shares should I sell?
  • Should I reinvest my cash somewhere else? How do I diversify?
  • How do I put my equity toward my financial goals, like buying a house, building a retirement fund, or traveling the world?
  • Farther down the line, how do I get on the path toward generational wealth?

These are big questions that are difficult to answer on your own, because you have an emotional stake in the questions themselves. And emotion creates risk.

It’s easy (and common!) to think, “Well, yes, my stock went down. But I know the company's leadership team is pretty smart, so I think it’s going to go back up.”

In reality, it might be better to sell the shares at a loss and put that money elsewhere. A financial advisor who doesn't have the same kind of emotional connection to your finances can help you think through those questions and run the numbers on what makes sense for your situation.

Advisors aren’t just there to manage your investments. They’re trained to ask you the right questions, to help you make better decisions with your money.

Do I really need a financial advisor?

If you’ve never worked with a financial advisor, you may think the only time to hire one is when you already have money. But the unique issue with stock options is you need to make a decision now if you want to maximize your equity’s potential down the line. Waiting until your options are “worth something” can be a costly mistake.

You also run the risk of backing yourself into a corner.

For example, if you choose to pursue a new job or happen to get laid off, you’ll likely only have 90 days to figure out what to do with your equity (a.k.a. your 90-day post-termination stock option exercise window). Even if you hired a financial advisor immediately after leaving the company, there might be very little they can help you with at that point — you can either afford to exercise your stock options in that exercise window, or you can’t. At best, their advice will be limited.

But if you had hired the advisor last year, the advisor would have already helped you plan for a scenario where you get laid off or have to leave the company.

What will a financial advisor do for me?

Your financial advisor will help you not only create a plan for your options, but also map out actions to take in various situations. Best of all, they’ll help you keep your emotions out of your decisions, so you can make choices that support your goals without being hindered by spur-of-the-moment, emotional choices.

Your advisor will give you advice tailored specifically to your situation. No article you read or report you research can give you that. Without the right help, you could still read hundreds of articles and come to the wrong conclusion. The “right help” also means finding an advisor familiar with equity planning.

Was this resource helpful?