Welcome to an insightful conversation with Marco Gaietti, a seasoned expert in financial planning and equity compensation. With over two decades of experience, Marco has guided countless employees, executives, and startup founders through the complex world of stock options, restricted stock units (RSUs), and managing concentrated stock positions. In this interview, we dive into the emotional rollercoaster of equity compensation, exploring how feelings like loyalty, fear, and overconfidence can shape financial decisions. Marco shares practical strategies for balancing wealth creation with risk diversification, offering frameworks to make informed choices without regret. Join us as we uncover actionable insights for navigating these challenges with confidence.
How do emotional attachments to company stock influence the financial decisions you see among your clients?
Emotional attachments play a huge role, more than most people realize. I’ve seen clients hold onto large chunks of company stock out of loyalty or belief in the company’s future, even when it’s not the smartest financial move. It’s often tied to their identity—especially for long-term employees or founders who feel like the stock represents their life’s work. This can lead to risky concentration, where a big part of their net worth is tied to one stock, making them vulnerable if the price tanks. My job is to help them see beyond that emotional pull and focus on their broader financial security.
What are some of the most common emotions that come up when clients deal with stock options or RSUs?
Loyalty is a big one—people feel a deep connection to the company they’ve poured their energy into. Then there’s fear, especially the fear of missing out on a huge stock price jump if they sell too soon. On the flip side, there’s also anxiety about losing everything if they hold on too long and the stock crashes. I also see overconfidence, where clients are convinced their company is unbeatable, which can blind them to real risks. These emotions often clash, leaving people paralyzed or making impulsive decisions that don’t align with their long-term goals.
Can you walk us through what you mean by the ‘Scenario of Least Regret’ when advising on equity compensation?
Absolutely. The ‘Scenario of Least Regret’ is about taking small, deliberate actions to avoid the emotional sting of missing out or making a huge mistake. With stock options, for instance, deciding when to exercise can be paralyzing because the stock price keeps fluctuating. Instead of waiting for the perfect moment—which rarely comes—I encourage clients to act incrementally. Maybe exercise just 5% of their options now to lock in some gains. This way, if the stock drops, they’ve secured something, and if it rises, they still have skin in the game. It’s a middle ground that reduces anxiety and regret.
How do you help clients overcome the fear of missing out when considering selling parts of their concentrated stock position?
Fear of missing out, or FOMO, is incredibly common. Clients worry that if they sell now, the stock will skyrocket tomorrow. I approach this by suggesting a gradual sell-off, like using dollar-cost averaging to sell small portions over time—say, 5% every quarter. This spreads out the risk and helps them feel like they’re not abandoning the stock entirely. I also remind them that selling doesn’t mean they’re out of the game; it’s about reinvesting those funds into a diversified portfolio to protect their future, no matter what happens with that one stock.
What strategies do you use to address overconfidence in clients who believe their company’s stock will only go up?
Overconfidence can be tricky because it often comes from a deep belief in the company, sometimes backed by insider knowledge. I start by reframing the conversation away from the stock price and toward their personal goals. I might ask, “If the stock dropped 50% overnight, how would that affect your plans for retirement or buying a home?” This shifts their focus to what they could lose. I emphasize that diversifying isn’t about doubting the company—it’s about ensuring they win no matter what. If the stock soars, great, but a balanced portfolio can grow steadily without the wild swings.
Why do you think so many people procrastinate when it comes to planning for their equity compensation?
It’s usually a mix of overwhelm and fear of making the wrong choice. Equity compensation is complex—there are tax implications, timing decisions, and market uncertainties. For many, it feels easier to just do nothing than to face those unknowns. I’ve had clients sit on options for years because they’re waiting for the ‘right’ moment or because they’re scared of the paperwork. That inertia can cost them big time, either in missed gains or unexpected tax hits. Breaking it down into small, manageable steps is key to getting them moving.
What’s your approach to helping clients define a ‘legacy anchor position’ with their company stock?
A ‘legacy anchor position’ is about finding a comfortable percentage of company stock—say, 5% to 20% of their holdings—that a client wants to keep long-term. It’s a psychological safety net, letting them maintain a sense of loyalty and connection to the company’s upside while diversifying the rest. I work with them to figure out what percentage feels right based on their risk tolerance and goals. Then, we build a plan to sell off the excess over time, reinvesting into broader markets. This balance lets them honor their emotional ties without betting their entire future on one stock.
What advice do you have for our readers who are navigating the emotional and financial complexities of equity compensation?
My biggest piece of advice is to separate your emotions from your financial strategy as much as possible. I know that’s easier said than done, but start by focusing on your life goals—whether it’s buying a house, funding education, or retiring comfortably—and let those guide your decisions, not your attachment to the company. Take small, consistent steps, like exercising a portion of your options or selling a slice of your stock over time, to reduce risk without feeling like you’re giving up. And don’t go it alone—work with a financial advisor who can provide clarity and help you act, even if it’s just one step at a time. That steady progress can make all the difference.
