It's not uncommon to see an executive have as much as 80% to 95% of his or her net worth tied up in company stock, and it stays that way until they change jobs or retire, Parsons says.

Planners should also expect to do careful stock option planning that transcends anything that even a complex computer program can do. "Stock option planning is one of the biggest challenges right now," says Greg Sullivan, president of McLean, Va.-based Sullivan, Bruyette, Speros & Blayney, which does planning for Fannie Mae and AOL executives. "When a stock price is falling and an executive has options expiring in six, 12 and 24 months, it's a tough call. You have to put sound probability analysis in front of the client so they can decide what to do. And you have to look at their specific situation."

As executives start to get more rational about diversification, they're also getting savvier about smart tax planning when it comes to options. In the past, executives were determined to hold a stock for a year after they exercised options in order to get capital gains treatment.

Now more are aware that income taxes can be preferable to AMT (alternative minimum tax) on stock that has tumbled in value. "Executives have seen lots of people get whipsawed when they exercised options, held the stock, incurred a big AMT bill and then saw the stock collapse after year-end," says Gotthardt.

Today, executives may not want to wait even a month before they sell ISOs. "With nonqualified options, you exercise, sell and diversify almost without exception to get diversity," Gotthardt says.

Selling is one way to diversify. The use of hedging strategies another, but it is still a mixed bag, planners agree. Officers are forbidden by securities law from using options, puts or calls to offset their exposure on restricted stock, so they're essentially stuck without a hedge until they leave the company or retire.

Non-officer executives, however, can employ hedging strategies. Sullivan says his firm has been doing some call option writing for executives who have emotional ties to stock and don't want to sell. "It's a way to generate some income off of some of the stock they're holding," Sullivan says.

The technique has allowed Sullivan Bruyette advisors to compete successfully for executive clients who had been working with Salomon Smith Barney and Merrill Lynch reps. "I've rarely seen the wirehouses using this technique. They're just trying to sell people wrap accounts. Their other big claim to fame is to get them to use margin accounts," he says.

Gotthardt has seen some variable prepaid forward contracts, which allow executives to collar a stock so they can basically pull out 80 % to 90% of the value of the collar position to invest elsewhere. While such strategies can work, it's crucial to value the costs as well as the risks (such as the risk the IRS will require the executive to undo the contract and pay taxes and penalties).

"What's most important is that you build a strategy that fits the client and takes full advantage of opportunities to sell stock and options over time," Gotthardt says. Smoothing the way, he adds, is the SEC's easing of insider trading rules that allow executives to file a plan to sell stock with company attorneys beforehand. Under the new rules, sales are not stopped on future sale dates, provided the executive had no knowledge of insider information regarding the dates when the plan was filed.