“I wanted to look at the their goals and the company he was joining and the possible scenarios over the next 10 years or more from as many angles as possible,” Wilson said.
The restricted stock units vested over the first four years of employment at 25% per year. The stock options had a 10-year expiration period, meaning he had to redeem them within 10 years or he would get no value. Both provisions are relatively standard offers by employers, Wilson said.
“The stock options offered the possibility of higher returns but with more risk, while the restricted stocks offered the least downside risk,” Wilson said. “Under the base case scenarios, if they took all restricted stocks they could have an extra $3 million in returns over a lifetime. If they took all the benefits in stock options, they might have an extra $5 million over a lifetime. But we decided that 100% stock options was not worth the risk. They ended up taking 75% options and 25% RSUs.”
Because the stocks are all held in one company, the couple plans to diversify when they can. When the restricted stocks vest, they will sell and diversify, and they plan the same for the options, meaning they will use the restricted stock units over the first few years and the stock options over years six to 10, he said.
The husband plans to stay with this company and could receive more restricted stock units in the future, said Wilson, who has retained the couple as clients.
“They are doing well and making progress on their savings,” Wilson said. “I see a lot of young people in similar situations. They are very comfortable with the uncertainty of changing jobs and seem to be looking for meaning in their work, as well as money.”