Investing in the stock market is inherently risky. Stock price values go up and down and that’s why diversification is crucial. If you have too much of your total investment portfolio in one company stock, including that of your own employer, you’re taking a chance that a small hiccup in its stock price could mean a large impact on your investments. Add to that the fact that your job could also be impacted by changes in corporate policy. You wouldn’t want to lose your job and watch your corporate stock plummet in value at the same time.

So while getting stock in your publicly-traded employer might sound like a great benefit, it can come with real risks if employees are not able to trade or sell those shares in the way that they want. To address these issues, robo-advisor Wealthfront has launched a free service that enables employees of publicly traded-companies to sell shares of company stock that they own. (For more, see: How to Sell Stock in Your Company.)

How You Can Sell Your Employer Stock

While it may seem easy enough to sell your corporate stock, there are many factors to consider. With potential tax implications, it’s wiser to sell your company stock over time. Wealthfront's Selling Plan prioritizes selling shares with lower tax consequences first and using the proceeds of those sales to pay the tax due.

In general, designating the right shares to sell along with selling those shares over time can minimize your tax liabilities. If investors use Wealthfront's tools, they will sell a few shares every day, while adhering to company blackout windows. You will be in complete control so that you can pause or discontinue the service at any time. If the same shares were to be sold through a broker, you’d likely pay $10 to $20 for each sale and those fees add up.

In order to participate, investors need to set up a Wealthfront account and connect it to the account that holds the company stock. Wealthfront automatically culls the information needed to create the plan. For those who are unsure of when to sell or what number of shares to sell, Wealthfront assists in creating the optimal plan. Users are able to adjust how quickly shares are sold as well as schedule one-time sales. They also have the option to transfer all or part of their company stock to the Wealthfront account.

Wealthfront can sell all vested and exercised stock including restricted stock units, stock owned from exercised options and stock bought through an employee stock purchase plan. It currently supports selling shares in these companies: Alphabet Inc., Apple Inc. Arista Networks Inc., Box Inc., Facebook Inc., Pure Storage Inc., Square Inc., Twilio, Twitter Inc., Yelp Inc. and Zillow Group Inc. It may support additional companies in the future. (For more, see: Wealthfront Versus Betterment.)

Tax Implications of Selling Company Stock

When you have capital gains on the stock, you pay taxes. In most cases, your corporate stock has a lower basis than the selling amount for the shares and you’ll owe the IRS. Also, the tax treatment is complex. It’s often difficult to project how much tax you’ll owe after the sale. Wealthfront automatically estimates your tax bill as they sell the shares. The company also offers the option to set aside part of the sales proceeds to pay the tax due.

Wealthfront's services are part of their low-fee, diversified robo-advisory investment service. After selling company stock, the platform can funnel the proceeds into a diversified investment portfolio, in line with risk preferences. Or investors may want to use the cash for something else such as a home or car.

The Bottom Line

Wealthfront's new company stock selling plan is an enticing offer for employees of the supported companies. The plan helps investors navigate the potentially confusing pitfalls of selling corporate stock and does so in a smart way, while minimizing taxes. (For more, see: Wealthfront Review 2016: Fees and Investment Facts.)

 

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