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If you work in tech, there’s a good chance a meaningful portion of your net worth is tied up in company stock—often through RSUs, ISOs, or non-qualified stock options. While equity compensation can be a powerful wealth-building tool, it also introduces a unique set of financial planning challenges, especially as your position becomes more concentrated.
The M.I.L.O METHOD: A FINANCIAL PLANNER'S PLAYBOOK FOR CONCENTRATED POSITIONS
Having built my practice in the Bay Area, a large portion of the families I’ve helped have worked in the tech space in one form or another. If you work in tech, there’s a good chance a meaningful portion of your net worth is tied up in company stock—often through RSUs, ISOs, or non-qualified stock options. While equity compensation can be a powerful wealth-building tool, it also introduces a unique set of financial planning challenges, especially as your position becomes more concentrated.
Over the past decade, I’ve worked with engineers, product managers, and executives at fast-growing companies that have built a great life by keeping their eggs in the company basket. While it worked out for them on the ride up, they end up grappling with the same question:
How do I reduce risk and minimize taxes without losing out on future upside?
To help clients navigate this, I use a four-part framework called M.I.L.O, designed specifically for professionals facing the complexity of concentrated stock positions. Here’s how it works.
m- minimize with options
You don’t have to sell all your shares to protect yourself. Using options strategies—like protective puts, covered calls, collars, or exchange fund replication—you can work towards reducing downside exposure, generate an additional source of income, or diversify your exposure to traditional indexes like the S&P.
By using complex options strategies, we strive to preserve the wealth you’ve accumulated and try to take some of the risk off the table. This may help give us breathing room to work on more tax efficient strategies while we divest over time.
I - Invest tax-efficiently
When you’re in your peak earning years, the basic tax levers matter. We focus on the no-brainer strategies—things like:
- Maxing out your 401(k) and HSA.
- Taking advantage of mega backdoor Roth contributions if your plan allows.
- Doing Backdoor Roth IRA and Spousal IRA contributions where applicable
- Using asset location to place potentially income-producing assets (like bonds or REITs) in retirement accounts, and keeping assets designed to be more tax-efficient assets in taxable accounts.
These aren’t flashy moves, but they’re foundational. They can help to manage long-term tax savings and may create room in your income plan to potentially realize gains from your concentrated position more strategically. In other words, we’re working towards building a clean, tax-smart base to work from.
l - lOCK IN TAX SAVINGS
When markets fluctuate—or when you’re diversifying—tax loss harvesting becomes an optional lever. This means intentionally realizing investment losses to offset gains elsewhere in your portfolio.
For many of my clients, we use direct indexing to automate this process, aggressively capturing losses without disrupting overall market exposure. This allows you to keep a diversified portfolio while using realized losses throughout the year to potentially offset the gains from your concentrated position and support a more tax-efficient exit strategy.
o - oRGANIZE yOUR eXIT sTRATEGY
Selling shares isn’t just about the price—it’s about the tax context. We build a forward-looking strategy that allows you to exit in phases, striving for minimal tax drag.
A big part of this is setting a “capital gains budget”—a target amount of gains we can realize in a given year without pushing you into a higher bracket, triggering the Net Investment Income Tax (NIIT), Alternative Minimum Tax (AMT), or affecting Medicare premiums. We coordinate this budget with your salary, bonuses, deductions, and other planning goals.
This structured approach takes the guesswork out of “when to sell” and helps you manage your tax exposure over time.
oTHER sTRATEGIES
While the MILO method serves as a strong foundation for addressing concentrated stock positions, there are additional strategies we often incorporate that can be just as impactful.
Charitable Giving as a Tax Strategy
If you have charitable intent, we can use that to your advantage. By grouping charitable contributions into years where you’re realizing significant gains, you can potentially reduce your tax bill while supporting causes you care about. Tools like Donor Advised Funds (DAFs) allow you to donate highly appreciated assets directly, potentially avoiding capital gains tax and still receiving a full deduction for the fair market value. It can be one efficient way to give, and a valuable way to chip away at a concentrated position.
Exchange Funds: A Niche but Powerful Tool
Another strategy that often comes up is the Exchange Fund. When implemented correctly, it allows you to contribute your concentrated stock into a pooled fund and receive a diversified portfolio in return—without triggering capital gains at the time of the exchange.
It’s a compelling concept, but it comes with trade-offs. Most exchange funds require multi-year lock-up periods, complex tax reporting, and higher fees. And while gains are deferred, they’re not eliminated. On top of that, access is limited—these funds are typically only available to accredited investors, and allocations can be hard to secure.
In many cases, we use options strategies to replicate the diversification benefits of exchange funds while retaining more flexibility and control. It’s not about ruling out the tool—it’s about understanding where it fits and going in with eyes wide open.
The Bottom Line
Equity compensation is complex—but with the right plan, it doesn’t have to be stressful. The MILO method gives us a structured, proactive way to manage risk, potentially lower taxes, and help preserve the wealth you’ve worked so hard to build.
We call this framework the MILO method—a structured, tax-aware approach to managing concentrated stock positions. It also happens to be the name of my cat, who (like many tech clients) is independent, strategic, and occasionally way too concentrated on one thing.
Contact an EP Wealth advisor to learn more about managing concentrated stock positions with your investment approach.
DISCLOSURES:
- EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
- Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
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- The need for a financial advisor or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC will satisfy your specific financial services requirements. Services offered by other advisors may align more to your specific needs.
- Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.
- All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be suitable or profitable for a client’s portfolio. The risk of loss can never be eliminated even if working with a professional.
- All expressions of opinion reflect the judgment of the advisor as of the date of the presentation and are subject to change. Market expectations are based on assumptions that may not come to pass. Portfolio positioning and equity outlook are rough estimates and are also subject to change.
- There is no guarantee or warrantee that a client or prospective client that engages EP Wealth Advisors, LLC in Business Planning services will experience investment success and does not ensure that a client or prospective client will experience a higher level of performance or results. No guaranty or warranty is made that any direct or implied service, offering, report, or analysis represented here will be offered or delivered. The services offered to clients will vary and depend on several factors.
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- Please consult with a CPA, tax professional, and/or attorney regarding your specific situation before implementing any of the strategies referenced directly or indirectly herein.
