Advisor Niche Spotlight: Equity Compensation

November 7, 2019

How unique financial planning needs can drive new business and lead to more COI opportunities

In our paper, Your High-Net-Worth Client Strategy, we defined a HNW advisor as having a client base composed predominantly (70%+) of households with $1M or more in investable assets. The paper made the case that even if those advisors’ clients are satisfied, some are still thinking of leaving. The paper also made the case that most advisors (69%) define their value proposition as “generalist.”*

Today, clients have more options than ever. They can get “general” financial planning via online tools, firms charging $300 up front and $300 per month, or virtual and robo firms for as low as 25-30 basis points**. Of course, some clients will still value a face-to-face meeting, so there can be a premium over the low-cost providers. But I think the successful advisors of the future will be focused on niches and specific segments of the market. The specialist instead of the general practitioner, if you will.

In this week’s Practically Speaking, I am starting a new feature –  I’ll be highlighting advisors with a niche or focus. This week, I want to introduce our readers to Daniel Zajac. Daniel is a CERTIFIED FINANCIAL PLANNER™ professional and partner at Simone Zajac Wealth Management Group, LLC. What is unique about Daniel is that he focuses on equity compensation. He works with both clients and other advisors.

Here is my conversation with him.

JDA: Daniel, let’s get started by having you describe your niche. 

DZ: I specialize in working with clients with equity compensation needs. This commonly includes incentive stock options, non-qualified stock options and restricted stock. It also includes people who have an employee stock purchase plan, stock appreciation rights, performance shares, and other employer stock owned outright.

Daniel ZajacEmployer equity typically makes up a meaningful part of my clients’ portfolios. For clients who have been with their employer for a long time, employee stock may have been accumulated over many years of stock grants and/or purchases. For early stage and pre/post IPO companies, employer equity may be the single (sometimes only) asset. 

Clients with equity compensation have unique financial planning needs. These needs often appear in the form of income tax planning, specifically with regard to the alternative minimum tax (AMT) and the AMT credit for incentive stock options. Concentration risk may also be a meaningful part of the conversation. How, and when, is the right time to transition from a single stock into other assets? How much do you want to own in company stock? These needs typically lead to the more traditional financial planning, retirement planning and wealth management conversations. 

JDA: How did you get started in this? How did you build it?

DZ: It was a combination of timing, luck and need.

Several years back, our firm was introduced to a client who had a significant position in company stock. As an enrolled agent who grew up in a firm with staffed CPAs, we had the requisite tax knowledge to identify several key tax planning items, but we knew that having tax knowledge wasn’t enough. 

In an attempt to learn more, I did what anyone would do – I read, talked to people in the industry, and asked a lot of questions. I quickly realized that:

  1. There was, in my opinion, a lack of specific knowledge in the area of equity compensation
  2. Most of what I could find was either overly technical white papers or information that was overly simplistic and lacking in practical application
  3. There were not many advisors who were focusing on this area

This research occurred near the time I started writing a blog on all things financial planning. As luck would have it, one of my best articles for generating organic traffic was one covering equity compensation. This only furthered my belief that the need for this niche was real.

I chose to focus all my writing on equity compensation-related topics and the payoff has been fantastic. I now have over 75 articles on the blog, covering all things equity compensation; I’ve been quoted in many sources; I’ve licensed my content to third parties; and I am registered to teach CFP® continuing education. I regularly drive new business nationwide and am becoming a thought leader in the space.

JDA: What are the benefits of focusing on niche?

DZ: There are so many benefits from having a niche, including technical, business development and business process. 

From a technical standpoint, focusing on a niche allows you to go deep into specific areas of client need. You can become a true expert in a single area, selling the value of your knowledge. The experience you gain from each client’s situation, experience and study only furthers your ability to help existing and future clients more completely in the future. 

"I was always concerned that having a niche would eliminate me from new business opportunities. It's been the opposite." -- Daniel Zajac, CFA

From a marketing and business development standpoint, my niche allows me to separate myself when speaking with centers of influence (COI). I am no longer “just another” advisor; I am an advisor with a specific set of knowledge who can help with this need. It has allowed me to directly target prospects – who they are and where to reach them. 

Internally, the niche has allowed our firm to create business processes. While each equity compensation client is unique, they often have similar issues and questions. This allows us to drive repeatable internal processes to analyze client information, which makes us better and more efficient at what we do. 

JDA: What have you learned? 

DZ: I have learned so much. Speaking from a technical financial planning standpoint, things ranging from the detailed tax implications of an Employee Stock Purchase Plan to the detailed construction of the AMT. I’ve learned about more advanced topics like the implementation of a 10(b)5-1 pre-arranged trading plan and how to incorporate qualified small business stock in to the plan. And everything in between. 

More globally, my client needs have also driven advanced financial planning conversations dealing with charitable and estate planning. 

In terms of practice management, I learned that having a niche does not alienate the remainder of my business. I was always concerned that having a niche would eliminate me from contention on other new (or existing) business opportunities. For me, it’s been the opposite. As I’ve gained more clients from equity compensation, it allowed me to collaborate with more COIs. The time with my COIs allows me to illustrate my equity compensation knowledge, as well as my knowledge on all other things related to financial planning and investment management.

JDA: Any parting thoughts?

DZ: If you had asked me 10 years ago if I thought I would be specializing in equity compensation, there is zero chance I would have said yes. It was, as I mentioned, a combination of luck, timing and need.

However, if you ask me if I wish I would have started the process of “niching” sooner, it would be a resounding yes. 

Legal Note

Daniel Zajac
Simone Zajac Wealth Management Group, LLC
Advisory services offered through Capital Analysts or Lincoln Investment, Registered Investment Advisers. Securities offered through Lincoln Investment, Broker/Dealer, Member FINRA/SIPC. www.lincolninvestment.com. Simone Zajac Wealth Management Group, LLC and the above firms are independent and non-affiliated.
The opinions and views expressed herein are those of Daniel Zajac. SEI bears no responsibility for their accuracy. Daniel Zajac and Simone Zajac Wealth Management Group, LLC, Capital Analysts and Lincoln Investment are not affiliated with SEI or its subsidiaries.

Investing involves risk including possible loss of principal. An incentive stock option (ISO) is a company benefit that gives an employee the right to buy stock shares at a discounted price with the added allure of a tax break on the profit. The profit on incentive stock options is taxed at the capital gains rate, not the higher rate for ordinary income. Non-qualified stock options (NSOs) are taxed as ordinary income. Typically, Rule 10b5-1 trading plans specify the number of shares to be sold (or purchased) at the price and date detailed and/or have a formula or algorithm that triggers the trade and the number of shares involved.
*SEI Survey, HNW Service, July 2018, n=375
**1 basis point = .01%

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