Josh Radman, founder of Presidio Advisors, shares his expertise in navigating equity compensation for millennials. He breaks down RSUs, ISOs, and NSOs, emphasizing the complexities of tax implications and the importance of aligning financial goals. Josh also highlights the challenges companies face in educating employees on these options. The discussion touches on the role of AI in predicting market behavior and the need for accurate data, revealing how current government data can mislead decisions. A must-listen for anyone dealing with equity compensation!
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Josh's Journey to Presidio Advisors
Josh Radman's background includes General Mills and tech companies like Walmart e-commerce.
His frustration with equity compensation led him to found Presidio Advisors, specializing in helping millennials.
insights INSIGHT
Equity Compensation Trends
Equity compensation, like RSUs and ISOs, is becoming more common but often confusing for employees.
Early-stage companies favor ISOs, while later-stage companies lean towards NSOs and RSUs.
insights INSIGHT
ISOs vs. NSOs vs. RSUs
ISOs and NSOs are options, giving the right but not obligation to buy, while RSUs grant actual shares.
Early-stage ISOs have lower 409A valuations, making purchasing more feasible for employees.
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Josh Radman joins us today to discuss a little discussed topic on Money Tree Podcast: Decoding RSU, ISO and NQ SOs. He also shares how government programs and how they impact our labor market. He shares an example from local Broogers, which struggled to find staff and often received resumes from unemployable candidates. Josh also touches on how employment data has been revised to show many jobs are part-time or within the government, driven by new regulations. Shifting gears, Josh explores the idea that large AI models, like ChatGPT, might be throttled to prevent them from predicting the future, potentially disrupting markets. He also highlights the critical need for clean, reliable data for AI to function properly, as current government data is often inaccurate or manipulated.
Today we discuss...
Josh Radman shares his background, from General Mills to tech companies like Walmart e-commerce, where he encountered confusion around equity compensation.
How his frustration with understanding ISOs, RSUs, and NSOs led him to found Presidio Advisors, a firm focused on helping millennials with equity compensation.
He emphasizes the importance of balancing tax considerations with investment risk and prioritizing financial goals.
Radman discusses regret minimization as a tool for decision-making, helping clients navigate the risks of equity compensation.
Companies often fail to educate employees about equity compensation due to legal concerns, leaving employees to navigate complex tax and financial decisions.
The complexity of ISOs, NSOs, and RSUs requires advanced planning and understanding, especially when managing liquidity events like IPOs.
How long-term capital gains tax rates are preferable (0%, 15%, or 20%) compared to ordinary income tax rates (up to 37%).
Employees often face a limited post-termination exercise period (typically three months) to exercise stock options after leaving a company.
It’s important to assess short-term, mid-term, and long-term cash needs when considering exercising stock options.
Restricted Stock Units (RSUs) are taxed as ordinary income upon vesting without requiring cash outlay to exercise.
A common misconception is that you must hold RSUs for a year to achieve optimal tax treatment; this is not necessary.
Employees often underestimate total exposure to their company’s stock due to both explicit and implicit risks.
Cognitive biases, such as the endowment effect, can lead individuals to overvalue their RSUs and resist selling.
Market returns are skewed, with a small number of companies generating significant returns; diversification is essential to mitigate risk.
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