Looking For Clarity About Your Equity Compensation At Work?

What is employee equity compensation? Equity compensation is non-cash pay that is offered to employees that many companies offer. While it might be clear to some, most people don’t fully understand the types and true meaning of their equity compensation. So let’s dive in. 

There are a few types of equity compensation that can be given to employees, such as stock options, ESPPs (employee stock purchase plans), and restricted shares. Further more, there are a few different types of stock options that people talk about being, Nonstatutory Stock Options (NSOs) and Incentive Stock Options (ISOs). Restricted stock is stock  that is not completely transferable until its rules have been met. Each of these options and stocks have different rules, characteristics, and caveats, so it’s important to inquire about each before making any decisions about them.

Can your equity comp harm you? Can it benefit you? Having equity comp means you are investing in the company which you work for, which hopefully means they are a good investment to take on. However, oftentimes owning too much can dilute your portfolio and bring on too much risk. If this is the case, you may want to speak to a financial professional to see if selling some of your stock or purchasing other types of assets is in the best interest of your portfolio.

It’s important to understand your your situation. The more information you have, the better you will be able to understand your equity compensation. 

Equity compensation can oftentimes be tricky and complicated, so it’s very important to discuss your particular situation with a financial professional to ensure you are making the most out of your investments. If you have equity compensation and have questions on what steps should be taken, email us at info@shermanwealth.com or schedule a 30-minute introductory meeting here. 

Entrepreneurs: Separate Biz and Personal Finances

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This article appeared on Investopedia.com on May 17, 2018

As an entrepreneur, you would likely do anything to ensure your business is successful. For some, this means pouring a large portion of their money into their business. However, investing all of your time and money into your business can create an unhealthy financial balance in your life because in this situation, the success of your business will fully decide the success and growth of your personal wealth.

Separating your business finances from your personal finances is hard and sometimes it’s impossible to keep the two fully isolated. The key is finding a way to grow your wealth independently of your business’s success, to reduce the risk you’re taking on. (For more, see: Financial Literacy Tools for Small Business Owners.)

Build Your Personal Savings

Go into every business venture with your eyes open. Even if you have an airtight plan for profit, there’s a chance your business will experience some rough patches. To prevent this from negatively impacting your personal finances, start building your savings as soon as you can. If you haven’t started your business yet, you have some time to grow a cash savings that’s accessible to keep your personal finances in check in case of a emergency. Giving yourself several months worth of expenses is non-negotiable, and having a year or more is ideal.

If you’ve already launched your business, don’t panic. You can still prioritize saving in your current budget. To get started, set an attainable savings goal and design your budget to help reach it. Cut back on personal expenses to free up some cash flow to reach those goals.

Keep Business and Personal Expenses Low

If you’re just getting started, you’re probably already working to keep your business expenses as low as possible. This becomes harder to do as you start hitting your stride. As the money rolls in, you probably see an increase in a few things: your personal share of the profits, the amount of personal spending you do, the amount of business expenses you’re willing to take on, etc.

If your business is continuously successful, this might not seem like an issue. You’ve worked for the money, found success, and reinvested a large portion of that back into your business. However, if you keep increasing business expenses, you’ll have less wiggle room to protect your personal finances if things go south. (For more, see: 401(k) Plans for the Small Business Owner.)

As you grow, your expenses will inevitably increase. Instead of trying to fight that, refocus to try and carefully evaluate every expense you take on. Shop around for less expensive options, or ask other business owners whether they have a similar expense, and how they’re handling it. You might find a creative solution that you hadn’t thought of before.

Avoid Distractions

We live in a gig economy where “side hustles” are the latest and greatest financial pursuit. There’s nothing wrong with having a side hustle, but as an entrepreneur it doesn’t always make sense. Your business should be your number one priority. Rather than picking a lucrative side hustle that will take time away from your business, refocus that energy into finding other streams of revenue for your number one priority.

Find new ways to add value to the customers you already serve, get involved in a collaborative project with another professional that will direct business your way, and think outside of the box when growing your revenue, rather than finding a less-focused method of growing your income.

Get Smart About Investing

It’s tempting to have your business be your sole investment. Don’t fall into that trap. By having a diverse investment portfolio, you’re helping to ensure that your wealth is growing independent of your business. If you continually invest exclusively in your business, you’re increasing the amount of risk you take on.

In a worst-case-scenario situation, your business goes under and you lose all of your money. To avoid that outcome, invest wisely, and in diversified funds.

You may look at other professionals like doctors or lawyers who own their own practices and think, “Wow, they’re well educated, smart and successful.” We see them and assume they have it all together, and that their finances are in a better spot than ours. The truth is, they’re business owners just like you. Their businesses are equally at risk. There are no financial literacy courses at medical school.

The good news is that you have the ability to take charge of your business and personal finances starting now. You can work to build savings, lower expenses and reduce the amount of risk you take on. If you make living a financially smart life a priority, you can make it happen. (For more, see: How to Reduce Risks in Small Business.)

Disclosure: The views expressed in this blog post are as of the date of the posting, and are subject to change based on market and other conditions. This blog contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Please note that nothing in this blog post should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax or legal advice. If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants, or attorneys regarding your individual circumstances and needs. No advice may be rendered by Sherman Wealth unless a client service agreement is in place.

A version of this article originally appeared on Investopedia.com

Robo Advisors vs Traditional Advisors: Beyond the Red Pill and the Blue Pill


When you hear the words Robo Advisors, what do you think of…? The Matrix?

And does Financial Advisor conjure up a swaggering DiCaprio in The Wolf of Wall Street? Or maybe someone in a Brooks Brothers suit, describing products you barely understand?

If you said yes to either, you’re not alone.

One common fear about the new wave of robo advisors is that, once you take the “red pill” and dive in, you’re no longer in control. You’ve turned your money over to a mysterious series of algorithms with no human in sight to help you guide it.

Many investors – particularly younger ones – are also put off by the idea of bespoke-suited advisors from traditional firms who are trying to up-sell them investments and insurance products with hefty fees and commissions. And even if they were to opt for the more conservative “blue pill,” traditional advisories are often not interested in speaking with them because they can’t make the hefty minimum investment.

While there is some truth to both stereotypes, there are also big shifts going on in the financial industry that make this a great time to take advantage of both a new breed of independent financial advisor and the efficiencies that targeted robo-platforms can provide.

Here are the differences – as well as drawbacks and benefits – in a nutshell:

Robo Advisors:


  • Inexpensive compared to full-service portfolio management
  • Lower barrier to entry: lower initial investment requirements
  • Democratic: all clients benefit equally from algorithmic decisions, not just the big investors
  • Data-driven: driven by numbers, trends, and deep data – not emotions


  • Limited scope: robo advisor only handle investment management, not comprehensive financial planning
  • Generic: they categorize you using broad-stroke demographic – not individualized- goal and risk-tolerance profiling to build your portfolio
  • Automatic: selling or “rebalancing” can be triggered by pre-set formulas at times that you might be wiser to stay put
  • Limited opportunities: many robo-firms currently have a limited or “preferred” set of funds and options you can invest in
  • Impersonal: no human interaction for questions regarding your individual investment portfolio

Traditional Financial Advisory Firms


  • Someone who picks up the phone when you call or will see you when you make an appointment.
  • Flexible: can make real-time decisions about what’s right for you or when to buy or sell not rather than being locked into formulas.
  • Multi-layers of expertise to call on


  • Barrier to entry: many traditional advisories have high minimums and confusing requirements and may only offer enhanced services to “premium” clients
  • Conflict of interest: many advisories have a “corporate agenda” to promote certain products, or they follow a [Suitability Standard] that doesn’t necessarily put the clients’ interests above their own
  • Change resistant: larger organizations can be “too big for their own good,” and slow to incorporate new tech or new processes that add value for their clients or address clients’ individual needs.
  • Limited customization: established firms frequently use old-school models of demographics, risk allocation, and target dates without factoring in what makes each client unique
  • Impersonal: while customer service is available, traditional firms often don’t truly “meet you where you are” and customize services and portfolios for you unless you have a large portfolio

Enter the New Breed

A growing number of independent financial advisors are disrupting the traditional model and starting to create a “third way,” hybrid advisories that strive to offer all the pros and – hopefully – none of the cons. They offer clients customized fee-only services – unhindered by corporate agendas – and with a lower minimum investment. At the same time they are able to incorporate the newest tech tools that not only make it easy for new clients to get started, but also offer fast, best-in-class investment management modeling to make faster decisions about managing investments.

Or, as Josh Brown so eloquently put it in a recent blog post, “…innovation and creative spirit is fleeing from the Old World to the new one.”

So why haven’t all advisors embraced the new technology to offer enhanced services to their clients? The three biggest reasons are inertia, inertia, and inertia. It’s not easy to change entrenched business models, culture, and processes. Remember how Netflix caught the video rental business napping?

Why Not Just Go with a Robo Advisor?

Robo advisors generally only offer investment management, not comprehensive, goal-oriented financial planning. While both investment advisors and robo advisors can recommend investment direction, strategy, and allocation, a good financial advisor can help you identify goals, customize budgets and cash flow planning, and help you with insurance, credit, and debt management, things a robo-platform can’t do.

The most important thing about the integration of new tech with personal attention and a customized plan is that a user-friendly tech interface can allow clients to manage all the pieces of their financial plans, from cash flow to 401Ks, while allowing an experienced advisor to monitor it and give clients a call when that advisor sees an opportunity, a red flag, or wants to check in about goals and direction.

These days, clients can see through the bespoke suits; what they’re looking for is bespoke service. By embracing selected and appropriate technology, this new breed of independent financial advisors are able to offer all the “pros,” while creating a new model of more transparent, conflict-free financial management that’s available to everyone who wants to set – an achieve – financial goals.


Donald Trump and the Benefit of Financial Foresight


Donald Trump’s current net worth – as he would be the first to tell you – is estimated to be between $2 and $4 billion, most of which he made through inheritance and real estate investments, along with other business dealings. An article in National Journal recently took a look at what might have happened if he had invested in an S&P 500 index fund back in 1982 when his inherited real estate fortune was estimated to be worth “only” $200 million.  According to National Journal’s calculations, if he’d invested carefully in index funds, Trump’s net worth would be a whopping $8 billion today.

Does this mean Donald Trump is a bad investor? Not necessarily: the oldest lesson on Wall Street is that everything is easy in hindsight.

While highly speculative, those numbers do highlight the ongoing debate over which is a better investment – real estate instruments or stocks. Both stocks have and the real estate market have had great runs in recent history and, depending on when you invested, you could make cases for both investments being the better choice.

But the stock market and the real estate market both experience volatility, dips, and extended recovery times so, for the average investor, a portfolio composed of mainly real estate or other fixed assets (like art or collectibles, for instance) poses some risks that should be hedged with proper cash flow planning, a diversified portfolio, and proper tax planning.

Cash Flow Planning

A good financial plan takes into account how much cash you need access to, or may need access to in the future. Cash flow planning should be a key factor in deciding whether real estate investments are part your individualized financial strategy.

As National Journal points out, Trump claims he is willing to spend upwards of $1 billion of his own money to fund his presidential campaign, yet his financial disclosure statements show that he may have less than $200 million in cash, stocks, and bonds. The rest of his fortune is tied up in real estate investments, which could be much harder to liquidate and use for his campaign.

Most of us aren’t running for president but, if something like the 2007 housing collapse were to happen again, any investor who is predominantly invested in real estate could have problems liquidating those – diminished – assets for retirement, college funding, or other non-presidential goals.

A solution: diversification.


Whether you are investing in real estate or the stock market, diversification is always a prudent way to address your own risk tolerance and use proper foresight in creating a winning strategy.

While with real estate funds, diversification can be achieved via many factors, including residential vs commercial investments, differing location focuses, and differing interest rates and financing mechanisms, it is still fundamentally one sector, subject to sentiment and swings.

With the stock market, on the other hand, diversification allows you the opportunity to invest not only in different asset classes, such as stocks, bonds, and money market funds, but in a variety of sectors and industries as well. Over the past 60 years, historically, the stock market has averaged an 8% annual return, so investors with strategically balanced and diversified portfolios, there is the opportunity for steady, while not spectacular gains, with the potential for less risk than investing only in the real estate market.

An investor who is properly diversified through multiple asset classes – including real estate if it makes sense for their own customized strategy – is potentially better protected against the short term results of one asset class experiencing a crash or a prolonged dip.


Another thing to consider is that options for investing in real estate in IRAs and other tax-deferred accounts are complicated and not every custodian will allow you to include real estate investments in a tax-deferred account.

Hindsight vs Foresight

While Donald Trump is an outlier because his high net worth shelters him from some of the issues with primarily being invested in real estate, it’s intriguing to consider “what if.”

In the case of a more typical investor, a little foresight can go a long way in making sure you are on your way to achieving your own financial goals. A sound financial plan should be tailored to individual goals and cash flow needs, with a customized cash flow plan, and diversified across multiple asset classes for the potential for steady and compounded growth over time.

Whether you are a Donald Trump with a large inheritance or a young professional just getting started, a solid plan and strategy puts the benefit of hindsight where it belongs: in a conversation over coffee or cocktails, and not as the basis for a winning investment strategy.

Do You Share These 4 Habits of the Wealthy?

Wealthy Habits

In his book “Rich Habits: The Daily Success Habits Of Wealthy Individuals,” author Thomas Corley outlines what he learned when he surveyed both wealthy and struggling Americans about their habits and attitudes.

Here are a few “rich habits” he identified that are worth integrating into your professional, financial, and even personal life, to help you on the road to achieving your own goals.

The Wealthy are Goal-Oriented

Corley found that 67% of the wealthy people he surveyed put their goals in writing, 62% of them focus on their goals every day, and a whopping 81% keep a to-do list.

It’s hard to reach your goals if you’re not focused on them and they’re not your top priority, and it can be daunting to have too many goals (one reason so few people are able to keep their New Year’s Resolutions.)

A more productive approach is to prioritize one important goal, create a plan of actionable steps that help you accomplish that goal, then add those steps, tasks and habits to your daily to-do list. These three simple steps will give your increased focus and will help you move closer to that goal.

Once you’ve incorporated them in your daily routine, identify a second goal and follow the same plan. The key to success is taking it one step at a time!

The Wealthy Use Downtime Wisely

At the end of your workday, do you like to relax with Netflix, video games, or YouTube? According to Corley’s data, 66% of the wealthy said that they watch less than an hour of television a day, 63% spend less than an hour a day on the Internet unless it is job-related, an impressive 79% say they read career and educational material each day, and an equally impressive 63% said “I listen to audio books during the commute to work.”

While we all like to relax and recharge with entertaining media, that time can never be recovered for things that help you become a stronger, more successful individual like reading, networking, exercising, or volunteering for a cause you believe in.

Time is the great equalizer: we all have 24 hours a day. What you choose to do with that time can either help you to reach your financial and life goals, or distract you from it, so choose wisely!

The Wealthy Invest in Their Future

Corley’s research also showed that the wealthy live within their means, pay themselves first, and don’t overspend.

Building wealth is not accomplished by upgrading to each new electronic gadget, leasing the newest model car, and living in an extravagant home. The wealthy, according to Corley, spend less than they earn, own and maintain their cars for many years, and save a significant portion of their income. While saving money and living modestly is not as sexy as a flashy smartphone, it will go a lot further toward providing a comfortable future.

Living within your means also includes not carrying credit card balances or heavy debt. When you are carrying debt, what you earn today is paying for yesterday’s expenses. Living within your means while saving and investing a portion of your income lets you invest in tomorrow, rather than yesterday, while learning to be satisfied with what you have today.

The Wealthy are Willing to Take Risks

Another fascinating finding of Corley’s research is that 63% of the wealthy people he interviewed said they that they had taken risks in search of wealth, while only 6% of the struggling Americans he interviewed said that they had taken risks.

For many, fear of failure is a great de-motivator and can be paralyzing. When you do not fully understand something, whether it’s a challenge, a potential project, an investment, or even a social problem, it can be easier to do nothing than to act. But without risk, there is often no reward.

What Corley discovered is that, instead, rather than fearing failure, the wealthy consider failure to be part of the process and – most importantly – an opportunity to learn.

How can you face risk without fear so that you can seize potential opportunities? Educating yourself is the key step. Researching the investment, the project, or the choice, and learning about the options and risks, help keep fear and anxiety about the unknown from clouding your decision-making process.

Even with the best preparation though, choices don’t turn out as envisioned. When that happens, take a page from the wealthy: learning from those failures and experiences will lead to more opportunities and better choices down the road!

Are Your Own Habits Setting You Up for Success?

While following each of these habits may not make you rich, they will certainly help you get into a success mind-set. 68% of the Americans on Forbes billionaire list consider themselves to be “self-made billionaires,” which means that they worked hard to reach their own professional and financial goals. The true route to financial success is through discipline and steady habits that grow your net worth over time.

Do you already share these four habits of the wealthy? If so, congratulations on your focus and your commitment to success. If not, try adopting one – or all four – of these important habits and see if it doesn’t get you closer to achieving your own goals!


With over a decade’s worth of experience in financial services, Brad Sherman is committed to helping his clients pursue their financial goals. Contact Brad today to learn more about how you can better pursue yours.

Learn more about our Financial Advisor services.

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Four Things Entrepreneurs Can do Now to Save for Retirement


While retirement may seem a long way off when you’re young and just starting to build a business – or older and rebooting – it’s important to have a retirement savings plan and stick to it to create the future you want.

Retirement planning can be difficult for anyone, but entrepreneurs and small business owners can face unique challenges. According to a 2013 American Express survey, 60 percent of small business owners said they weren’t saving enough for retirement, and over 73 percent said they were worried about not being able to afford the lifestyle they want in retirement.

While many employees can choose to make automatic deductions from their paycheck towards a 401k, for instance, entrepreneurs have to make a conscious decision to sock away money for retirement, as well as find plans that work for them.

Fortunately there are several things that you can begin doing now to contributing to your long-term financial future. As always, please review these and other options with your financial planner to see what strategy may be most suitable for your individual situation.

1) Open an IRA

If you haven’t already, now may be as good a time as any to open an Individual Retirement Account (IRA). IRAs are long term investments that allow you to save money for the future in a tax efficient way. They also offer catch up contributions if you’re over 50.

Traditional vs. Roth

Traditional IRAs allow you to deduct contributions the year in which they are made, then pay taxes when you withdraw the money. A Roth IRA allows you to pay taxes on your contributions now, rather than upon withdrawal and earnings and distributions may not be taxable if held in the Roth IRA for up to 5 years.

For older investors who are approaching retirement, traditional IRAs probably make more sense, as their tax rate may likely be lower in retirement than it is currently. Younger investors, however, may want to consider a Roth IRA if they believe their tax rate could be higher in the future than when they make their contributions.

Contribution Limitations

Regardless of whether you elect to contribute to a Roth or Traditional IRA the IRS sets annual limits each year stating the maximum individuals can contribute to their IRA based on their annual earnings. For instance, in 2015 you are limited to a maximum of $5,500 annually (or $6,500 if you are 50 or over).

Finally, with either type of IRA, there are penalties and taxes for early withdrawals prior to 59 ½ years old!

Please consult your tax professional regarding your specific situation and the specific rules that apply to you.


2) Consider alternative forms of IRAs to increase your contribution limits

If you are your company’s only employee, or you only have a couple of other employees, you may want to look into setting up either an SEP-IRA or a SIMPLE-IRA.


SEP-IRAs allow you to contribute up to 25% of your salary, or $53,000 (as of 2015) whichever is smaller. This is significantly more than what non-SEP-IRAs allow for.

Setting up a SEP-IRA may be an easy choice if you and your spouse are your only employees, but there can be other costs associated if you have other people working for you.


SIMPLE-IRAs provide an alternative that is cheaper for companies with several employees.

With the SIMPLE-IRA, the employer creates an IRA for each employee. Employees have the option to contribute a certain percentage of their income to their IRA. Employers are then required to match that percentage up to a maximum of three percent of the person’s salary, or contribute two percent of each person’s salary into the IRA.

By creating a SIMPLE-IRA the owner is then able to contribute an additional $12,500 ($15,500 for those 50 and over) to his or her own IRA.

If you have only a few employees working for you and you expect to contribute either the full $12,500 or a large portion of it, there is a good chance that your tax savings may more than pay for the cost of contributing to your employee’s IRAs. Please consult your tax professional for more specific information about how this could affect you and your employees.


3) Setup Automatic Deductions

Unfortunately, we all have a tendency to procrastinate, and thinking about retirement is often not at the top of our priorities! It’s easy for entrepreneurs and small business owners in particular to become distracted and forget to contribute to your retirement account(s). Automatic deductions solve this problem.

By setting up your IRA and other retirement accounts to take money directly out of your bank account or paycheck each week (or month,) you can ensure that you contribute as much money as you feel you can, up to the full tax deductible amount, each year. You no longer have to worry about forgetting to, or putting off, contributing.

With any IRA, think carefully about how much you can realistically contribute. They are considered long term investments and you cannot access the money prior to a specific age without incurring taxes and significant penalties for making early withdrawals. Please make sure you are carefully considering your short and medium term goals. And remember: starting to save early is a good way to get on the road to achieving your goals.


4) Speak with as Experienced Financial Planner to Help You Create a Plan

Taking care of long-term financial goals can be a challenge but fortunately you don’t have to go it alone. Financial planning professionals can help you create an individualized plan focused on your specific goals. Whether they are:

  • Saving for retirement
  • Saving for your children’s education
  • Buying a home
  • Having a baby

Financial planners are here to help you plan for the future you envision for yourself and your family.



With over a decade’s worth of experience in financial services, Brad Sherman is committed to helping his clients pursue their financial goals. Contact Brad today to learn more about how you can better prepare for retirement.

Learn more about our Retirement Planning services.

Related Reading:

Finding Financial Independence

YOLO (You Only Live Once) so you Need a Retirement Goal

Your 401K Program: A Little Savings Now Goes a Long Way

How Much Money do you Need for Retirement These Days?

The Benefits of Saving Early for Retirement

Advantages of Participating in Your Workplace Retirement Plan