For senior executives in listed companies, managing personal finances can be both a challenge and an opportunity, particularly when it comes to leveraging employee share schemes and vested stock options. Many executives in tech and other listed sectors are often paid not only in cash but also in shares or stock options, which represent a significant portion of their overall compensation package.
While these shares can provide substantial long-term value, they are often underutilised in the short term due to the belief that liquidation is the only way to access the value within them. However, what many don’t realise is that they can unlock the financial potential of these shares and options without the need to sell, providing a flexible approach to personal and investment financing.
Using Shares and Stock Options to Boost Servicing Without Liquidation
Executives holding vested shares or those participating in employee share schemes and stock options can use these assets to boost their borrowing power. One of the key advantages of this approach is that it enables the use of the value of their shares without liquidating them, which means they can continue to benefit from future appreciation in stock value.
Some lending institutions, particularly those specialising in high-net-worth clients, now offer solutions that allow shares to be used as income to purchase properties. This can even be in the form of shares that have not vested and will not vest for some time. The income generated from shares, can be recognized as part of the client’s serviceability, thus increasing borrowing capacity.
Key Considerations for Executives in Listed Businesses
Executives often hold substantial shares or stock options in their company, which may be fully vested or vesting over time. Here’s how this can work in your favour:
1. Vested Shares and RSUs (Restricted Stock Units): Shares granted in the past and now fully vested can be considered as an asset without the need for liquidation. These shares offer a form of income that can be used for servicing loans.
2. Vesting Schedules: Shares that are set to vest in the future provide ongoing future income. These future vested shares can be recognised for future income potential, offering another layer of security for the lender.
3. Limit Tax Implications: The use of income from this asset can allow higher lending amounts, which can also allow clients to avoid potential tax liabilities that may arise from selling shares prematurely via capital gains, in the event they needed to provide a higher deposit towards the purchase.
4. Wide Use of Companies: The lenders that allow these policies will usually allow the use of shares from larger listed businesses even offshore, i.e. Google, Amazon, Microsoft etc. Expats can also be considered.
Tailored Financial Solutions for Tech Executives
For tech executives, in particular, shares and options are often a significant part of their remuneration. Whether these executives are in Australia or working in offshore listed businesses, they can benefit from specialised financial solutions that allow them to use their vested shares as income. These solutions provide executives with greater flexibility to manage personal expenses, fund new investments, or secure loans for property purchases without needing to sell their shares.
By utilising this method, tech executives can maintain their equity positions, which may have significant upside potential, while still accessing the financial support they need for personal or professional investments.
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