As a successful professional, you’ve worked hard to climb the career ladder and make a name for yourself. Along with professional growth often comes financial rewards, and two terms that might have crossed your path are RSUs and ISOs. But what exactly are RSUs and ISOs, and how do they fit into your overall wealth management strategy? In this blog post, we’ll demystify these terms and help you understand their significance.

RSUs, or Restricted Stock Units, are a form of compensation that many companies offer to their employees. When you receive RSUs, you are granted a specific number of company shares, but they are subject to a vesting schedule. This means that you cannot sell or transfer these shares until they have vested, which typically occurs over a period of time or upon the achievement of certain performance milestones.

Let’s say you work for Company XYZ, and as part of your compensation package, you are granted 1,000 RSUs. These RSUs have a four-year vesting schedule, meaning that 25% of the shares vest each year. At the end of year one, you would have 250 vested shares, and at the end of year two, you would have 500 vested shares, and so on.

The main advantage of RSUs is that they align your interests with the company’s stock price. As the stock price rises, the value of your RSUs increases. However, since RSUs are tied to the company’s stock, they can also expose you to concentrated risk. If a significant portion of your net worth is tied up in RSUs, a decline in the company’s stock price could have a substantial impact on your wealth.

This is where ISOs, or Incentive Stock Options, come into play. ISOs give you the option to purchase company stock at a predetermined price, known as the strike price. The key advantage of ISOs is that they offer potential tax benefits. If you hold ISOs for at least one year after exercise and two years after the grant date, the difference between the strike price and the stock’s market value at the time of exercise is taxed as long-term capital gains, which can be lower than ordinary income tax rates.

Let’s illustrate this with an example. Suppose you have ISOs with a strike price of $50 per share, and the stock is currently trading at $100 per share. If you exercise your options and hold the shares for the required holding period, any appreciation in the stock’s value will be taxed at the more favorable long-term capital gains rate when you eventually sell the shares.

While ISOs offer potential tax advantages, they also come with risks. If the company’s stock price falls below the strike price, your options may become worthless. Moreover, exercising ISOs often requires a cash outlay to purchase the shares, which can be a significant financial commitment.

So how can you effectively manage your concentrated wealth tied up in RSUs and ISOs? Here are a few key considerations:

  1. Diversification: It’s important to diversify your investment portfolio to reduce concentration risk. Consider selling a portion of your vested RSUs and reinvesting the proceeds into a diversified mix of assets.
  2. Tax Planning: Work with a financial advisor who can help you navigate the tax implications of RSUs and ISOs. They can assist in optimizing your tax strategy and guide you through the intricacies of exercising options.
  3. Risk Management: Consider implementing hedging strategies or alternative investments to protect against downside risk associated with concentrated positions.

Remember, RSUs and ISOs can be powerful wealth-building tools, but they also come with unique risks. It’s important to take the time to understand these instruments and to incorporate them strategically into your overall financial plan in order to achieve your long-term financial goals.

At 83rd Street, we specialize in helping successful professionals like you navigate the complexities of concentrated wealth. Our team of experienced financial advisors can provide personalized guidance tailored to your specific situation. Whether you need assistance with diversifying your portfolio, optimizing your tax strategy, or implementing risk management techniques, we are here to help. Contact us today to schedule a consultation with one of our experts.


The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by 83rd St. Wealth Management, LLC to be reliable. Additional information about 83rd St. Wealth Management, LLC is available in its current disclosure documents, Form ADV and Form ADV Part 2A Brochure, which are accessible online via the SEC’s investment Adviser Public Disclosure (IAPD) database at, using CRD # 172115. 83rd St. Wealth Management, LLC is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice.