Financial Planning

Financial Advisors for Highly Compensated Employees

By  Brian Thorp

Disclaimer: In order to make Wealthtender free for our readers, we earn money from advertisers including financial professionals and firms that pay to be featured on our platform. This creates a natural conflict of interest when we favor promotion of our clients over other professionals and firms not featured on Wealthtender. Learn how we operate with integrity to earn your trust.

You may consider yourself fortunate to earn an above-average salary, but as your annual compensation increases, the complexity of your personal finances and taxes often increases, too.

From limitations on how much you can invest in your 401(k) plan to navigating the alphabet soup of executive benefits (e.g., ISOs, NQSOs, RSUs), you have a lot to consider as a highly compensated employee.

The term “highly compensated employee” may sound subjective based upon an individual’s own perception of how much compensation equates to being “highly compensated”. However, the Internal Revenue Service has its own definition:

Ask the IRS: Are You a Highly Compensated Employee (HCE)?

Highly Compensated Employee – An individual who:

  • Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or
  • For the preceding year, received compensation from the business of more than $125,000 (if the preceding year is 2019, 130,000 if the preceding year is 2020 or 2021 and $135,000 if the preceding is 2022), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.

(Source: Internal Revenue Service)

As a highly compensated employee (HCE), you have unique financial planning needs, whether you’re just starting out in your career, or you’re counting down to retirement in a few years. Given the complexities of your compensation package, it makes sense to work with financial professionals who understand the ins and outs of equity compensation, especially the Internal Revenue Service rules governing stock options, restricted stock, and other forms of equity based compensation.

If you’re thinking about working with a financial advisor, how can you be sure you’re hiring an advisor who truly understands your unique needs as an HCE?

Fortunately, you have more options today than ever before to find a specialist financial advisor with the knowledge and experience to help you navigate the complexities of your compensation plan. Beyond researching financial advisors in your neighborhood, you may find the best financial advisor for you lives several states away and is easy to work with virtually, often via Zoom online meetings, for example.

So is a financial advisor who specializes in serving highly compensated employees right for you?

Let’s learn more by getting answers from financial advisors featured on Wealthtender who offer their perspectives on the potential benefits of working with a specialist.


👩‍💼 Get to Know Financial Advisors Who Specialize in Serving Highly Compensated Employees

This page is organized into sections to help you quickly find the information you need and get answers to your questions:

  1. Q&A with Financial Advisors Who Specialize in Serving Highly Compensated Employees
  2. Get Answers to Your Questions About Financial Planning for Highly Compensated Employees
  3. Browse Related Articles

– Financial Advisors Who Specialize in Serving Highly Compensated Employees –

Three Questions with Todd Pouliot, AIF:

We asked Cleveland-based financial advisor Todd Pouliot to answer three questions he often hears from highly compensated employees:

Q: I’m anticipating a promotion that will include stock options as part of my compensation package for the first time. I’m excited about the potential upside of the options but worried about the tax implications. What should I be thinking about?

Todd: When you receive a promotion or a raise at work, this event can come with a number of changes that can impact your financial situation. When we meet with clients preparing for a promotion, we review the potential financial impact, including:

Cash Flow and Income

  • Will your cash flow change due to the raise or any additional compensation that comes with the promotion?
  • Will this change impact your ability to save for retirement and other goals? If so, work to increase your savings in areas like your retirement plan, HSA, and others.

Employee Benefits

  • In the case of a promotion, does the new job come with added benefits you need to consider?
  • These additional benefits might include stock-based compensation or deferred compensation.

Retirement Plans and Deferred Compensation

  • In the case of a promotion, will you now have added benefits, such as stock-based compensation, deferred compensation, and/or an equity position in your company? If so, there are a number of planning issues to consider.
  • Will the higher income affect your ability to make contributions to a Roth IRA or deduct contributions to a traditional IRA?
  • Be sure you’re fully funding your employer-sponsored retirement plan.
  • If our clients will receive stock options or restricted stock as part of their promotion, there are a number of planning items we’ll help our clients through.

Your bank account will thank you

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Get to Know Todd Pouliot:

View Todd’s profile page on Wealthtender or visit his website to learn more.

Are you a financial advisor who specializes in serving equity compensated employees?

✅ Get added as a specialist in this area in our next monthly update (Subject to availability and qualification criteria.)
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Tax and Insurance Planning

  • Your higher compensation may present some additional tax planning issues. At the very least, you will want to ensure your withholding is adjusted to ensure you don’t have a hefty tax payment due.
  • Your new income might merit increases in life insurance coverage and /or disability insurance coverage.

Your promotion can have a great financial impact, and a financial advisor specializing in working with highly compensated employees can help you make the most of your career advancement.

For additional information and additional insights from Todd, please visit this page.

📺 Video: What Issues Should I Consider If I Get A Promotion or Raise at Work?

Q: For people with substantial exposure to equity in their employer through stock options who are unsure whether or not they need to hire a financial advisor, what guidance can you provide to help them make a more informed and educated decision?

Todd: The first response I have for anyone is to consider my personal story about having all or a large portion of your investments into the company you work for:

Several things in my life have led me to a calling to help people. After watching my father see his retirement significantly reduced with the company he worked for since he was 16 and continued to climb the ladder for 27 years go bankrupt it made me take notice of the world around me.

He lost his job, a significant reduction in his plan for retirement and pension, and most importantly a means to provide for his family. It made me realize that hard work pays off and that sometimes, some things may be out of your control.

He again had misfortune when I witnessed him losing a small fortune in stock options one month from retiring due to someone committing the crime of embezzlement within the company he helped to build. This crime forced him to continue to work an extra 15 years before he felt he could retire. Again, hard work paid off but outside forces and had a negative influence on not only his retirement portfolio but his family and his future as well.

While my father’s story ends well, the lessons have been proven many times over. Find an advisor who will professionally work for you personally. Lessoned learned; Don’t put all your eggs in one basket and you may need someone other than the company you work for to help you plan for retirement.

It’s also important for you to understand that ISO, NQSO, RSU, and other employee benefits such as Phantom Stock Options are all different and have varying problems and solutions:

What issues should I consider with my Incentive Stock Options (ISO)?

Incentive Stock Options (ISOs) are a form of equity compensation, offering employees a share in the potential appreciation of a company’s value, with preferential tax treatment. Deciding whether and when to exercise ISOs and sell shares can be difficult and requires cash flow analysis, complex tax planning, and a long-term strategy.

Topics related to ISOs we like to cover with clients include:

  • Issues to consider at grant
  • Implications of exercise, including early exercise and post-vesting
  • Tax considerations and the IRC §83(b) election
  • Share ownership and sale strategies
  • Concentration and other risks

What issues should I consider regarding my Non-Qualified Stock Options (NQSO)?

Non-Qualified Stock Options (“NQSOs”) are a common form of equity compensation, offering a share in the potential appreciation of a company’s value. Many highly compensated employees are granted NQSOs as an employee of an issuing company or as an officer, director, contractor, or consultant. Deciding whether and when to exercise your NQSOs and sell shares can be difficult and requires cash flow analysis, complex tax planning, and a long-term strategy.

Topics related to NQSOs we like to cover with clients include:

  • Issues to consider at grant
  • Implications of exercise, including early exercise and post-vesting
  • Tax considerations and the IRC §83(b) election
  • Share ownership and sale strategies
  • Concentration and other risks

What issues should I consider regarding my Restricted Stock Units (RSU)?

Restricted Stock Units (RSUs) are a popular form of equity compensation that, after vesting, result in an employee’s receipt of shares of company stock or a cash payout. Similar to a bonus, RSUs can positively affect your cash flow but incur taxes that require planning. Many of our clients have been (or will be) granted RSUs by their employers during their careers. If you receive RSUs, it is important to develop an understanding of how these interests fit into your overall financial plan.

Topics related to RSUs we like to cover with clients include:

  • Key characteristics of RSUs
  • Ordinary income tax considerations at vesting
  • Capital gains tax considerations at sale
  • Company stock and portfolio considerations

Q: My company offers an ESPP, but I’m unsure if I should participate. What are the most important factors I should consider to help me decide? 

Todd: You should consider the tax implications of investing through your ESPP to determine what the taxable consequences will be upon the sale of stock acquired through the ESPP. Watch the video below and visit this page to learn more: Will I Have To Pay Tax On My Qualified Employee Stock Purchase Plan ESPP?


🙋‍♀️ Have Questions About Financial Planning for Highly Compensated Employees?




About the Author
Brian Thorp, Founder and CEO of Wealthtender profile picture

Brian Thorp

Founder and CEO, Wealthtender

Brian and his wife live in Texas, enjoying the diversity of Houston and the vibrancy of Austin.

With over 25 years in the financial services industry, Brian is applying his experience and passion at Wealthtender to help more people enjoy life with less money stress.

Connect with Brian on LinkedIn

Disclaimer: In order to make Wealthtender free for our readers, we earn money from advertisers including financial professionals and firms that pay to be featured on our platform. This creates a natural conflict of interest when we favor promotion of our clients over other professionals and firms not featured on Wealthtender. Learn how we operate with integrity to earn your trust.

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