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Stock options, RSUs, and ESPPs are all valuable forms of equity compensation. They are often used to align the incentives of both an employer and its employees. If you own company stock, you may have experienced market volatility, and have seen firsthand how swiftly change in the stock price can change the value of your equity. Amid a strong economy and thriving stock market, the stock price can skyrocket. Possibly to such an effect that it can create a concentrated position in your company’s stock — the opposite of diversification. And in all honesty, this concentration isn’t necessarily a bad thing. It genuinely depends on your unique circumstances and goals.

As quickly as your company’s stock price rises, they can fall, and in unsettling ways. As you can imagine, that will affect the value of your equity grants and holdings of company stock. When the market becomes uncertain, and things aren’t going well for your company’s stock, it’s important to remember that equity compensation is a long-term deal. Thankfully, there are a few behavioral tricks at your disposal when dealing with volatility in your company’s stock.

Understand What You Have And How It Works

It’s critical to be familiar with the type of equity compensation you have, whether non-qualified stock options, incentive stock options, restricted stock, restricted stock units (RSUs), or an employee stock purchase plan (ESPP). The nature of the equity compensation type will affect its perceived value and ultimately shape your expectations. 

Let’s take a look at stock option grants. Most of them have a 7-10 year life or exercise window. Even if your company’s stock price were to fall or fluctuate soon after receiving the grant, stock options have significant leverage if the price rises later. Although there aren’t any guarantees in the world of investing, the potential upside can be very rewarding. On the other hand, RSUs always have value when they vest and belong to you outright. If you’re at a company like Spotify, where you can select a mix of equity types, RSUs can balance out some of that volatility that is inherent with stock options. 

Play The Long Game

When thinking about equity compensation, stop expecting quick riches. Even the rocket ships and unicorns require time, patience, and dedication. If it helps, try to think of equity comp as a tortoise rather than a hare. I understand this perspective is easier said than done, but that’s even more reason to develop a financial plan that considers your values and goals when dealing with volatility with your company’s stock. Ultimately, this is the essence of holistic financial planning. At best, you will gain clarity and confidence in your financial life and decision-making in good AND bad markets. At worse, you’ll have a back-up plan tucked if and when plan A doesn’t come into fruition. 

Volatility Can Present Opportunities

Volatility and your company’s stock go hand in hand. Not to mention, it can also present a valuable opportunity to assess your tolerance for risk in real-time. When in volatile markets, evaluate your comfort level with financial risk, and gauge how you feel about your asset allocations, including company holdings and retirement accounts. If you find it too challenging to deal with volatility in your company’s stock, you may want to consider diversifying some or all of your portfolio. You’ll likely be less worried about volatility when your financial future is less dependent on a single company or stock. 

Manage Your Expectations

Your cash flow is best tied to your base salary, not to investments in your company’s stock. Moreover, relying on gains from equity grants can lead to altering feelings of ecstasy and anxiety — a rather unhealthy combination. If you must sell company stock for cash to pay for living expenses or other urgent financial demands, there are a few key areas of financial planning first to understand. 

It’s a personal preference in my household to separate investment income from our lifestyle needs as it provides an additional layer of protection against stock price volatility. We don’t depend on stock options or RSUs to cover regular expenses. Instead, we’ve earmarked it for flexible goals like going on vacations or buying our dream cars. In that way, we’re not let down if the stock price tanks and our lifestyle wouldn’t be largely affected. 

When I first launched Deane Financial, my vision was to help Millennials in tech to be smart with their money and navigate the world of equity compensation. I admit that as a young entrepreneur, I was quickly swept up in the industry rhetoric of “grow or die” and convinced myself that I wanted to build an enterprise-level RIA. Soon enough, I realized that I had completely misread my preferences. I simply didn’t dig deep enough. 

These days, I’ve identified with the idea of being the best at what I do, as opposed to the size of the firm. I want Deane Financial to be nimble and specialized. I want to have a personal relationship with everyone I work with because this is a company that I want to run for decades. Had I not taken the time to A/B test my genuine preferences, my personal values would clash with those of my business.

A/B test your financial life

Being misaligned with our true desires can have enormous implications for our financial lives. We might think we want an early retirement, or that we prefer active investing over passive investing. But, if we don’t test these assumptions, we’ll never know our sincere preferences — with potentially significant financial consequences. 

Without getting into the weeds, A/B testing is a method of comparing two versions of a product against each other to determine which one performs better. Similar to software, we can use A/B tests to study our individual preferences, especially as they pertain to our financial decision-making. With the hope of encouraging you to A/B test your financial life, I’ve put together a few scenarios that can be useful to identify your genuine preferences.

Having a goal vs. Having a financial plan

Goals and plans are not synonymous. Similarly, setting a goal holds little to no value without a plan. Hopefully, this isn’t news to you. For me, a goal is only the tip of the iceberg, as it’s merely an end measure. Knowing where you are now and where you want to be is a good start. But without having a comprehensive plan in place — the steps you need to take to get from point A to point B — all you have is a dream. 

On the other hand, financial planning isn’t a destination; it’s an ongoing process. Similar to iterating and agile development — it involves agile planning, evolutionary development, continual improvement, and encourages rapid and flexible responses to changes in life. Sound familiar? Mainly, financial planning is about three key things: finding out where you stand financially, getting proximate to your core desires and goals, and creating a plan to achieve those goals. 

This year, I’m working on not being tied to company goals and outcomes, but instead staying diligent and consistent with my habits and systems. It’s the best decision I’ve made so far, besides launching The Equity Shop, of course. The way I see it, if I’m setting random milestones, or even worse, adopting the goals of competing firms, I’m not setting myself up to win. Instead, I’m fine-tuning my system with the potential to set me up for long-term success. 

Spoiler alert: if you don’t have a strong “why,” the “how” is going to be extremely challenging to overcome. 

Thinking about retirement vs. financial independence

In my years as a financial advisor, I’ve learned that one of the most important decisions people will make is the timing of their retirement. Believe it or not, your perspective on retirement plays a significant role as well. My dad had a pretty tough time understanding why I would start a business rather than climb the corporate ladder and retire with great benefits. We eventually chalked it to up to a difference of opinion. 

My perspective on retirement is quite different than my dad’s. Instead of choosing to build wealth through a professional career, my approach is to build wealth through entrepreneurship. The earnings that Kem and I save aren’t for retirement per se. It’s more aligned with our goal of financial independence. I’m grateful that I’ve found my calling. And so, I’m in this game for the long run. For me, I find purpose in being a financial guide for Millennials in tech who are working to live fulfilling lives. Eventually, my dad came around and saw things from my point of view. Now, he comes home from work, excited to talk about his 401(k) and retirement goals.

Just to be clear, this doesn’t mean that I’m in support of the FIRE movement. It’s not that I don’t think it can work; it just takes numerous outliers to be proven a sustainable strategy. For what it’s worth, the idea is mediocre at best. Rather than adhering to multiple constraints only to potentially still run out of money, imagine what it would be like to simply take a two-year sabbatical to do the things that bring you joy. 

Monitoring your portfolio more vs. less frequently

Technology has made it seamless for investors to access real-time investing performance. However, research suggests that more frequent updates are likely to make investors obsess over short-term losses. That is to say; this emotional response can lead to buying investments at market highs and selling at lows — a recipe for underperformance.

Conduct an A/B test on your financial life and record how these new habits emotionally impact you. Condition A could involve checking your investments multiple times a day on a mobile app. How do you feel? Does it affect your mood or the outlook of your future? Conversely, the condition B could involve checking your investment performance annually using paper account statements. Does less feedback make you less stressed? Or are you missing out on pertinent information? If it helps, create a journal. Perhaps this is useful data for identifying your relationship with money.

Timing the market vs. systematic investing

Unless you have a crystal ball and can predict stock market activity, there’s no reason you should attempt to time the market. Even the best active managers fail to beat market returns consistently. I’ve repeated this time and time — nothing does the job like dollar-cost averaging. It’s a sure proof way to build wealth slowly by prudent investing. While diversification does not guarantee a profit or protect against loss in a declining market, it can help smooth out volatility, so don’t chase performance. Remember, investing isn’t the goal; we invest for your goals. 

Instead of trying to pick the next hot stock, you should stay invested in a globally diversified portfolio specifically customized for your situation and goals. Those who display faith, focus on their goals, and ignore the noise, will see it through. Long-term thinking is a superpower, and you will come out on top. 

Spending on material things vs. experiences 

If there’s one thing I find annoying, it’s those financial pundits who shame Millennials into thinking every purchase is a poor decision. They find it easier to say “no” than trying to understand our unique needs and circumstances to help us make the best financial decisions. In my advisory firm, one of my priority goals is assisting clients in finding a balance between enjoying experiences now vs. delayed gratification. I’ll admit it’s not easy. 

When you’re on the grind, and there’s only so much money left after your regular savings and expenses, you have to ensure it’s well spent. I suggest spending it on the experiences that will make you happy. Experiences become a part of our identity. We are not our possessions, but we are the accumulation of everything we’ve seen, the things we’ve done, and the places we’ve been. 

Similarly, if you’re going to spend money on a material item, try to link the purchase to an accomplishment, so it holds sentimental value. As for me, I have a few goals of my own that are within reach, along with an online shopping cart with a Movado watch and podcast equipment. 

DIY vs. Hiring a financial planner

With the technology available today, most Millennials can be DIY investors through most of their accumulation phase. If you have a simple tax situation, can control your behavior, and is prudent with financial planning, a generalist adviser adds cost while adding little to no value. 

Personal finance is full of one size fits all rules and oversimplifications. Unfortunately, these rules don’t always work. The reality is that many people either can’t or won’t manage their money competently. Believe me, this stuff requires a ton of time and pristine attention to detail.

“Wild success requires aggressive elimination. You can’t be great at everything”. 

– James Clear 

To be more productive and successful, you should be looking for someone you trust to serve as your financial guide. Think of us as an accountability partner. And because life happens, we can also help you make any changes to your plan along the way. Even better, we can design a plan in a way that prepares you for turbulent moments and provides the comfort desired to weather the storm. 

At the very least, interviewing financial planners can provide reassurance that they’re legitimately worth the extra money. The good ones, at least. And by good, I mean those you vibe with and possess the specialized knowledge needed to address your specific pain points as a Millennial in tech 😉

At a recent holiday party, someone asked me, “why do you work exclusively with Millennials in tech?” I generally would respond that my soon to be wife is a developer, and we just happen to share a similar network. It was never my intent to oversimplify my business model and the lane I’ve created for myself; I simply figured it would be best to eliminate the minutiae and keep the conversation casual. 

Until recently, it never occurred to me that I wasn’t sharing my story. I wasn’t allowing people the opportunity to learn about what I do and who I serve. So, since my goal is to write and publish a written piece once a week, I figured answering “why Millennials in tech” with authenticity would be a good contender. 

Don’t Just Start a Business, Solve a Problem

While I was in b-school, I started my finance career. Not surprisingly, it didn’t take long for me to realize that the financial services industry at large was reserved for wealthy baby boomers. As a matter of fact, most firms have relatively the same culture and are built on the same broken business models — models that I knew we were unfit to serve my generation. With ownership being the end goal, I decided to use their business model to my advantage. I became a student of the game. Instead of spending my early years in the business cold-calling and chasing after friends and family members — like many other financial professionals — I devoted my time to a deep-learning of my craft.

At the same time, my fiancée, Kemberly, pivoted into the tech space, and I discovered an enormous opportunity to address certain pain-points from the wealth management lens:

Equity compensation — it was standard in the startup and technology world.

After all, it’s a practical decision: startups that aren’t able to pay a competitive salary or those that desire free cash flow for growth opportunities could still attract and retain top talent by offering equity in the company.

Essentially, it allows employees to participate in company growth. You succeed when the company succeeds. It’s a marvelous way to incentivize employees and align their interests with those of the company. And if you’re lucky enough to have picked a winner at an early stage, you could amass enough wealth to shift your entire family trajectory. I’m talking about real legacy wealth. No wonder it plays such a critical role in employment decisions among Millennials — 60% of us agree that equity compensation was the primary reason for accepting a position. 

But, how does one navigate that wealth potential without a grounded financial education? Moreover, how do we use it achieve our goals if professionals charged with the responsibility to serve are incentivized by product sales, commissions, the size of your assets, and anything but your best interest? These are the problems that I’m solving at Deane Financial. 

There Are Riches In Niches 

If you know anything about the financial services industry, as a black male, under the age of 30, I stand out like a sore thumb. Often, when with colleagues, I’m usually the youngest and only black person in the room. I’ll admit, for a long time, I naively perceived this to be a disadvantage. Be that as it may, it took me reading Malcolm Gladwell’s “David and Goliath” to find the advantage in my “disadvantage.” In fact, I rightfully convinced myself that my blackness and age made me a unicorn in the financial services industry (no pun intended). 

A rhetoric you hear in this industry is “grow or die.” No knock to them, but I don’t compete with the Morgan Stanley’s, J.P. Morgan’s, or even Wealthfront’s of the world. We’re a purpose-driven company that doesn’t just make decisions to maximize the value or growth of the business alone, but instead..

chooses a path that aims to be the best at what we do.

So, why Millennials in tech? Simple. I’d rather be a big fish in a small pond than a minnow in a vast ocean. For me, there’s value in going an inch wide and a mile deep — and garnering expert knowledge. By the same token, expecting a company to be good at everything, might be unrealistic because very few businesses can serve everyone, all the time, in any situation. The way I see it, specialization is my key differentiator, competitive advantage, and holds me accountable to produce things with greater efficiency and excellence.

Moreover, specializing and working with a niche allows me to be proximate to the needs and desires of my clients and their families. It allows me to be entrenched in their lives and the community I serve. The continued clarity gained from working with a niche is instrumental in aiding my vision for building a firm that addresses the particular needs, constraints, concerns, and opportunities inherent for Millennials in tech. And I must say, it’s refreshing to experience that feeling of genius, knowing you’re equipped with solutions to deal with complex “things” way before they have the power to become problems, simply because you’ve seen them time and time again.

Noteworthy mention: If you haven’t noticed, there’s a lot of noise in the financial world. Being a specialist makes it easier to ignore that noise and only focus on the “things” that can potentially affect my clients and their specific goals. 

The Future of Innovation

It’s no secret that Millennials lead the way in the digital future. After all, we are digital natives who’ve been shaped by technology. To be quite honest, technology is what enables me to run this investment advisory firm as a solo-advisor. So much so that I’m not certain the path I’ve forged for myself was feasible or cost-efficient 10-15 years ago. Over the years of planning and building Deane Financial, I’ve grown a tremendous appreciation and genuine interest in technology and the role it plays in wealth management for my generation. It’s my way of staying ahead of the curve and adapting to industry disruption to best serve my clients.

An additional plus side: it’s pretty insightful to get feedback on UI/UX, functionality, and even feature optimization for my client-facing tech stack. Not to mention, I once had a client offer to read our Data and Privacy Policy and give enormous feedback, including valuable best practices. Fortunately for me, he has extensive experience in cybersecurity. See where I’m going with this?

The Perfect Match

I alluded to this earlier in the post, but I genuinely wanted to work with like-minded people. It is my priority to build long and fruitful relationships with people whom I generally mesh well with. Of the 85,000 CFP® Certificants, there are vastly more Certificants over the age of 60 than under the age of 30. Moreover, just under 3.5% of Certificants are Black or Latino (I can empathize with the black tech community in this regard for sure). This is not to say your average advisor — usually a 55-year-old white male — can’t be a good fit. It’s just less likely that someone 20 to 30 years your senior is coming from a similar place in life as Millennials. Simply put, there’s no generation before us that have done the things we’re doing in this specific era. It’s all about relatability. 

P.S. If you’re in the New York City area, I’m still accepting invitations to open bar/free food holiday parties 🙂 Happy holidays!