Episode 40: Beyond Commissions: The Rise of the Fee Only Financial Advisor
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In this episode, Christopher Nelson discusses the importance of fee only financial advisors for technology employees. He interviews Max Pashman, who left a larger industrial shop to serve technology employees and sales professionals with equity compensation.
They discuss the benefits of fee only advisors and how they provide great planning services. In the second half of the episode, Nelson highlights five common mistakes that technology employees make with their equity and finances, providing valuable insights to help listeners avoid these pitfalls. Tune in to gain valuable knowledge and make informed financial decisions!
In this episode, we talk about:
- The Shift to Fee-Only Advising: We discuss the benefits of working with fee-only advisors, including the trust and transparency they offer compared to traditional fee-based models. Max explains the different fee structures available and how they align with client needs.
- Common Equity Mistakes: We outline five major mistakes tech employees make with their equity:
- No Plan for Equity: Many fail to have a strategy for their equity compensation, leading to missed opportunities and potential tax pitfalls.
- Lack of Tax Professional: Without a tax advisor, tech employees may not optimize their equity for tax efficiency.
- No Divestiture or Diversification Plan: Holding too much company stock can be risky. A plan to diversify is crucial.
- No Emergency Planning: Not having an emergency fund or insurance can leave employees vulnerable to unexpected financial shocks.
- No Financial Goals or Independence Plan: Without clear financial goals, achieving financial independence can be more challenging.
- The Importance of Planning: Max emphasizes the importance of having a clear plan for equity compensation and how it fits into one's overall financial goals. He also stresses the need for ongoing financial planning to adapt to life's changes.
- The Emotional Aspect of Financial Planning: We touch on the emotional relief clients feel when they have a clear financial plan and the stress associated with managing sudden wealth, such as post-IPO.
- Choosing the Right Equity: I advise listeners to consider the type of equity compensation they want when choosing an employer, as it should align with their financial plan and goals.
- The Role of a Financial Advisor: Max and I discuss how a good financial advisor can help navigate the complexities of equity compensation, tax planning, and diversification to preserve and grow wealth.
Episode Timeline:
[00:00:47] Financial advisors and mistakes.
[00:06:03] Underserved high earners and wealth building.
[00:08:37] Fee-based vs fee-only model.
[00:14:09] Fee-only financial advisor models.
[00:16:14] Building a comprehensive financial plan.
[00:21:55] The relief of financial stress.
[00:26:23] IPO day and stock excitement.
[00:27:48] The fear of screwing up.
[00:32:23] Concentrated positions and equity.
[00:36:00] Investing questions and timing.
[00:40:02] Organizing equity vesting schedules.
[00:43:37] Risk of single stock investments.
[00:49:01] No emergency plan.
[00:53:41] Importance of emergency funds.
[00:55:18] Financial independence and retirement.
[01:00:29] Shaping financial independence desires.
[01:03:00] Keeping it simple in investing.
[01:07:18] Contacting Max for more information.
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