Going Through an IPO? You Don’t Just Need a Financial Advisor — You Need a Team

As soon as you hear that your employer might go public, questions start piling up. Should you exercise your stock options now? What’s that going to cost you? Should you sell everything at once? Hold some of it? What’s the tax bill going to look like? How is this going to change your life?

No matter how personal, profound or perplexing the questions get, you need answers. Getting help from a qualified professional can help you navigate the process with confidence. But no single person covers every angle. The financial decisions you’ll face before, during and after an IPO touch financial planning, tax law, investment planning, estate strategy and risk management. They play off each other endlessly. Your mix of stock options and restricted stock units (RSUs) opens the door to meeting your financial goals and may introduce options for mitigating taxes, which raises questions about charitable giving, which adds new layers to your estate.

So rather than relying on a single guide to walk you through the IPO maze, consider building a small team — and put one person in charge of it. Here's who we think you should include, and why.

Start with an advisor with planning chops

A windfall from an IPO has wide-sweeping implications for your finances. That’s why it’s important to center your team around an advisor who provides comprehensive financial planning. Their role is to take a step back and see how this major financial moment fits into the rest of your life. "The planning component sits on top of everything else," says Aaron Brickley, a certified financial planner (CFP) at Brickley Wealth Management in San Mateo, California.

Keep in mind that “financial advisor” isn’t a regulated title. You’ll need to vet the qualifications of anyone you consider working with. Check an advisor’s registration and disciplinary history with FINRA's BrokerCheck and the SEC's Investment Adviser Public Disclosure (IAPD) database. The CFP Board also lets you verify an advisor’s certification.

But there’s no single credential to look for when you’re planning around equity compensation. It can be challenging to tell the difference between an advisor who has shepherded others through an IPO and one who just says they can.

» Ready to get started? Here’s how to choose a financial advisor

It’s reasonable to want to avoid being someone’s guinea pig, says Jane Yoo, a CFP with Jane Financial who serves clients in the tech industry in the San Francisco Bay Area. She suggests looking for an advisor who has specific knowledge of equity compensation and IPO rules who can also handle some of the tax planning. “The tax implications of equity compensation, especially when it comes to stock options, can be really tricky,” Yoo says. “Someone with experience can really save you from a shocking tax bill.”

Meeting with several advisors before you hire one gives you the opportunity to ask about their previous IPO advising experience. Brickley recommends asking for explicit examples of liquidity events they’ve handled, and listening for whether they can comfortably describe what should happen during each of the three phases (before the IPO, during the lockup — a period during which company insiders can’t sell stock — and after, when you can finally sell shares).

Then fill out your roster as needed

Your financial advisor may provide in-depth education and strategy that touches every piece of your finances. But often, you need specialists to bring the plan to life. Your advisor’s firm may offer complementary services in-house. If they don’t, your advisor may offer recommendations for other professionals to add to your team’s roster, or you can find someone on your own. Certified public accountants (CPAs) and estate attorneys generally charge hourly or flat fees.

A tax pro

A CPA who knows equity compensation can help you model your tax liability under various scenarios and recommend strategies to manage it. Equity taxes during an IPO can be complicated, especially when you hold multiple types of equity with different rules. So finding someone who knows the ins and outs of what you hold can help you avoid costly surprises when tax season arrives.

An investment advisor

When it’s time to sell your shares, an investment advisor can help you diversify your holdings and build a portfolio around your long-term financial goals. Your financial advisor may fill this role, but keep in mind that someone who is paid to offer investment advice must be registered with the SEC or a state regulator. You can confirm your advisor is actually registered via IAPD or BrokerCheck. If your advisor doesn’t offer investment advice or management, you may need to hire someone else.

An estate attorney

This one is easy to ignore. "No one wants to get their wills and trusts done," Brickley says. "It's like people are allergic to it." But an IPO can change what your estate is worth overnight, and your estate plan ensures you have the final say over how that wealth is handled when you’re gone. At a minimum, get the basics in place: a will, a durable power of attorney, a medical care directive and up-to-date beneficiary designations, which override your will.

An insurance broker

Insurance may be far from your mind as you dream about an IPO windfall. But it’s worth reviewing your home, auto and umbrella coverage, Yoo says. (Umbrella insurance provides additional coverage when you exhaust the limits of your other policies.) “Let's say your company goes public; you have this windfall and you accidentally rear end someone while driving, and you're at fault for causing injury,” she says. “Someone could sue you for emotional distress, for injuries. And if they know that you're an employee of, for example, SpaceX, they could put a target on your back and make you more susceptible to lawsuits.”

Coordination is key

If you assemble these professionals, you may have all the expertise you need. But there’s still a chance your plan could fall apart. Brickley says clients may assume their advisor, CPA and attorney are coordinating behind the scenes. “And maybe some are,” he says. But when you bring in multiple professionals, “you need to make sure that they’re talking.” Even excellent professionals can give conflicting advice if they aren't working from the same assumptions.

Financial advisors are in a natural position to coordinate the work being done on your behalf. But the default posture of every advisor is different. Some are hands-on, thinking of themselves as quarterbacks, and will even sit in on any calls you have with other specialists, if you want them to. Others will give explicit instructions and provide detailed paperwork but leave the relaying of information to you.