RSUs can be a great benefit. They can also quietly turn into a problem you do not notice until the wrong day.

Here is the pattern we see over and over:

This is concentration risk. It is not about being pessimistic. It is about not letting one company decide your whole financial life.

Charles Schwab puts a simple threshold on it:

“Generally, holding more than 10-20% of your company stock can put your portfolio at risk of overconcentration.”

This article gives you a client-facing, plain-English framework for equity compensation planning. You will learn:

  1. How RSUs actually work and how they are taxed
  2. Why concentration risk is bigger for executives than most people realize
  3. A simple decision framework for whether to hold or sell
  4. A practical sell-and-diversify plan that reduces regret
  5. The tax and cash flow mistakes that cause avoidable surprises

If you want the service-page version, start with Who We Serve → Executives. If you want the process we use to coordinate taxes, cash flow, and investments, see Coordination and Strategic Tax Optimization.

What RSUs are, in plain English

An RSU is a promise of company shares that becomes yours when it vests.

Two important points:

At vesting, you receive shares or the cash value of shares depending on the plan. That vesting date is the key moment for taxes and decisions.

The Clarity Sweep — how RSUs are taxed at vesting

Most people get confused because RSUs feel like an investment, but at vesting they behave like income.

Here is the simple version:

This leads to the first common executive mistake.

Mistake: thinking the withholding is the full tax bill.

Withholding is often not enough, especially for high earners, people with bonuses, or people in high tax states.

What happens next:

This is why we treat equity comp as part of strategic tax optimization, not as a random bonus.

What concentration risk really is

Concentration risk is when one stock has too much influence over your outcomes. It usually shows up in three ways:

  1. Portfolio risk. A single stock drives your results more than the market does.
  2. Career risk. Your income is tied to the same company.
  3. Timing risk. Your vesting, bonus cycles, and potential layoffs can line up with stock declines.

Executives get hit with all three at once. This is why holding a large employer stock position is not the same as holding a large position in a random company. It is more correlated to your life than you think.

The So What Sweep — what changes if you take concentration seriously

If you build a plan early, you gain:

If you ignore it, you usually end up making decisions under pressure. Pressure decisions are expensive.

A private-banking-style decision framework for RSUs

Forget complicated models for a moment. Use these four questions.

Question 1 — What job is this company stock supposed to do

Is it long-term growth you can afford to hold? A future goal fund (home, tuition, liquidity event, sabbatical)? A safety buffer? A legacy asset you want to keep?

If you cannot name the job, you are not investing. You are defaulting. Defaulting is how concentrated positions happen.

Question 2 — If you received cash instead of shares at vesting, would you buy this stock today

This is the cleanest mental reset. Because economically, holding vested RSUs is the same as choosing to buy and hold company stock with your own money.

If you would not buy it with cash today, it is hard to justify holding it just because it arrived as RSUs. This question removes the “free money” feeling and replaces it with a real decision.

Question 3 — How big is the position relative to your total wealth

Use simple thresholds. You do not need perfection.

A practical guideline:

Schwab’s 10–20% range is a useful trigger for action. Also consider concentration relative to liquid investments, not just total net worth including home equity.

Question 4 — What happens to your life if the stock drops 30% in six months

Do not answer emotionally. Answer mechanically. Does it change retirement timing? Does it change the ability to buy a home? Does it change how secure you feel about your job? Does it create a tax issue? Does it change your willingness to take career risk?

If a decline would meaningfully change your plan, you are overexposed.

The Prove It Sweep — a simple example

Let us say you have:

That is about 28% concentration ($250,000 divided by $900,000).

If the stock drops 30%, that position becomes $175,000. That is a $75,000 hit to your invested assets, before any broader market movement.

Now add career risk. If a company downturn causes both a stock drop and job instability, you get hit twice. This is the part people underestimate.

A practical sell-and-diversify strategy that reduces regret

Most executives do not need a heroic plan. They need a boring plan they can follow. Here are three simple approaches.

Option 1 — Sell at vesting (the clean default)

Rule: When RSUs vest, sell most or all shares immediately, then reinvest into a diversified plan.

Why it works:

If you still believe in the company, you can keep a small “belief” slice. The key is putting a cap on it.

Option 2 — Keep a capped position and sell the rest

Rule: Keep company stock up to a set percent of your investable assets. Sell anything above the cap.

Example caps:

This creates a system — stock rises, you trim. Stock falls, you stop trimming. Your risk stays bounded.

Option 3 — Sell on a schedule (if emotions are your enemy)

Rule: Sell a fixed dollar amount or fixed share amount each month or quarter.

This helps when you freeze up and do nothing, when you feel you must “time it right,” or when you need a plan that runs without constant decision making.

This is not about maximizing price. It is about reducing the chance you never sell.

The Specificity Sweep — where the money goes after you sell

Selling is not the full plan. Reinvesting is.

A clean reinvest plan usually ties to:

This is where private banking coordination matters. Your reinvestment plan should fit your whole balance sheet, not just your brokerage account.

Tax planning realities executives need to know

1) Withholding may be too low

RSU withholding is often a flat rate or plan default. Your actual marginal rate may be higher. If you get large vesting events, you may need additional withholding, estimated payments, or a planned cash reserve.

2) Holding shares after vesting creates a second tax layer

At vesting, you already recognized ordinary income. After vesting, if the stock goes up you may owe capital gains tax when you sell. If the stock goes down, you carry the loss.

This matters because some people think “I already paid tax, so I should hold.” You paid tax on income. You did not prepay the future capital gains tax.

3) Tax strategy is year by year, not one decision

Equity compensation planning is a repeating calendar — vesting schedule, bonus cycle, open trading windows, blackout periods, projected income. A good plan maps these in advance and avoids December panic.

This is also why we connect it to ongoing wealth stewardship, not just one year’s taxes.

Common mistakes executives make with RSUs and company stock

Mistake 1 — Letting the position “become” concentrated. No one chooses to wake up with 30% in company stock. It happens slowly. The fix is a cap or an automatic sell rule.

Mistake 2 — Treating company stock like a loyalty badge. You can believe in your company and still diversify. Diversification is not disloyalty. It is basic risk management.

Mistake 3 — Ignoring the double correlation. Your paycheck and your stock are both tied to the same place. If the company has a rough year, both may decline.

Mistake 4 — Failing to plan for taxes during big vesting years. If you have a large vesting year plus bonuses, you can blow through brackets and trigger side effects like Medicare surcharges later in retirement. Even if you are far from Medicare, big income spikes can still create avoidable tax friction now.

Mistake 5 — Waiting to sell until after the stock drops. This is the classic sequence — stock rises, you hold. Stock drops, you freeze. Stock drops more, you sell. You promise you will diversify next time. A rules-based plan prevents that pattern.

A simple executive RSU plan you can actually follow

Step 1 — Build your equity comp calendar

List the next 12 to 24 months of vesting dates, expected share amounts, blackout windows, bonus timing, and expected income range.

Step 2 — Pick your concentration cap

Choose a percent and write it down. If you want a clean starting point, 10% is often a useful action line.

Step 3 — Decide your default sell rule

Common defaults: sell at vesting. Keep up to the cap, sell the rest. Sell on a monthly schedule.

Step 4 — Decide where proceeds go

Tie this to your broader plan — build or maintain your cash reserve, fund retirement accounts, invest into a diversified allocation, plan for taxes.

Step 5 — Review twice a year

You do not need constant tinkering. You need scheduled review. This is what keeps the plan consistent even when markets are not.

The Heightened Emotion Sweep — what this fixes in real life

A good plan reduces three common feelings executives carry quietly:

You replace those with rules you can defend, fewer surprise tax bills, less dependence on one company for your future, and better control over big decisions like retirement timing and lifestyle changes.

That is the real benefit. Not a perfect trade. Less regret.

The Zero Risk Sweep — what this does and does not promise

This framework aims to reduce concentration risk, improve tax awareness around equity compensation, and make diversification more repeatable and less emotional.

It does not guarantee better returns, guarantee you will never feel regret, predict your company’s stock price, or eliminate all tax complexity. It simply reduces avoidable risk and makes the decision process cleaner.

Next steps checklist

If you want to tighten your RSU and company stock plan, start here:

  1. List all company stock and RSU exposure (vested and unvested)
  2. Calculate concentration as a percent of investable assets
  3. Choose a cap (5%, 10%, or a number you can live with)
  4. Choose a default sell rule for vesting events
  5. Confirm whether withholding is sufficient for your marginal rate
  6. Decide where sale proceeds go (cash, taxes, diversified investments, goals)
  7. Build a simple calendar for vesting and blackout periods
  8. Review twice a year and after major compensation changes

If you want help building a clean plan that coordinates taxes, cash flow, and reinvestment, start with Who We Serve → Executives, Strategic Tax Optimization, or schedule a private intro.

Closing thought

Equity compensation is a wealth-building tool. It should not turn into a single-company bet you never meant to make.

The best executive plans are simple — clear caps, clear sell rules, and a reinvestment plan that fits your life.

If you want a private intro to map your equity compensation and build a diversification plan you can actually follow, schedule here.