The Secret Weapon for Equity-Rich Executives | Dan Pascone with Adam Crawford | Ep #33

Adam Crawford is Head of Revenue at Cander, a company that works with public companies, and very late-stage private companies preparing to list, on stock compensation and 10b5-1 plans. He started his career at a stock plan services broker and earned his FINRA licenses. He then moved in-house at a client company, where he helped run its stock programs through an IPO and an acquisition.

He calls the MuleSoft IPO a career bucket-list moment. At Cander, he says the focus is helping public companies manage the market impact of employee equity awards while giving employees better tools to manage the shares they're issued.

Adam's plain-English version is that a 10b5-1 plan is a preset selling schedule for your company stock. One level deeper, it's a formal, binding contract you sign in advance that sets a schedule of transactions. Its purpose is to give you an affirmative defense against insider trading claims. You adopt the plan when you aren't in possession of MNPI, and after the cooling-off period the contract starts trading on its own.

Historically, these plans were reserved for Section 16 officers and other top executives who are almost always in the know and find it hard to sell without raising questions. Adam says that has changed. Some of Cander's institutional clients now offer plans to every employee as a diversification tool, and he believes more people have access than realize it. We cover the fundamentals in our guide to 10b5-1 plans for RSUs.

Adam's caveat is that he's not a lawyer, so treat this as a map, not legal advice. His starting point is your company's insider trading policy. It's a separate document from SEC rules, and it's the one that governs you as an employee. In general, if you're in an open trading window and you aren't in possession of MNPI, you can transact, and that can include entering a plan. From there, you'd typically work with a wealth manager, an attorney, or a specialist provider to design it, and you'd check with your company's legal team first.

Because the plan is binding, the details matter. Adam notes you're committing to roughly a 12-month schedule, with a cooling-off period before the first trade. The SEC amended Rule 10b5-1 in 2022, and you can read the rule changes in the agency's own words in its press release on the amendments. Our video on building an RSU selling plan walks through how we think about the design.

Dan pointed to 3 reasons these plans appeal to the executives we work with:

• Automation: for a busy professional, automating good financial behavior saves time and stress.
• Blackout coverage: if you adopt the plan during an open window, it can keep selling during blackout periods. Dan has seen executives who wanted to sell a block of stock and couldn't because the window was closed.
• Cleaner optics: for senior executives, how and when you sell is in the public eye. A predetermined schedule is a cleaner experience for the company, the market, and analysts. Adam adds that benchmarking against what peers with similar titles are doing is worth the effort.

Adam raised 2 more situations. First, monthly vesting: some vests land in closed windows, so you may owe tax on shares you can't sell to raise cash. Second, people on restricted or special blackout lists, such as M&A, certain finance roles, and research, can be blocked from trading even in an open window because of what they know. For them, a plan has become a common way to have a protected path to sell. We show how to map vests, blackout windows, and tax dates in our guide to building an executive income and equity calendar.

RSUs, ESPP shares, and options can all sit inside 1 plan, and each carries its own tax treatment. With RSUs, the fair market value is taxed as ordinary income at vest through payroll, like a bonus. The company withholds taxes, sometimes by selling some of the shares on your behalf. After that, what matters is your cost basis (the value at vest) and your holding period, which determine whether later gains or losses are short-term or long-term.

ESPP programs let employees buy company stock at a discount through payroll deductions. The tax rules are more complex and closer to incentive stock options. In a plan, though, shares that have been purchased are just another lot, and whoever runs the plan needs to understand how they're taxed.

Dan flagged a common misconception: many people think they have to hold RSUs for a year to avoid income tax. The income tax event already happened at vest. The holding period only affects whether later gains are taxed at short-term or long-term rates. Adam sees 2 camps. The first logs in every quarter and sells everything at vest, treating stock like an ATM. The second holds indefinitely. Neither is wrong by itself, and it's your money, but neither is a plan. A rules-based schedule can sit between them.

If you've been at a company for years, you may hold many vesting lots at different cost bases, and some may be underwater. Tax-loss harvesting means voluntarily selling certain lots at a loss to offset gains on other lots. Traditionally, a 10b5-1 plan required you to specify exactly which shares to sell, lot by lot, up to 12 months ahead.

Adam describes Cander's approach as automating that step. Its software picks lots at the time of each trade based on the execution price, your cost basis, and your tax position, with the aim of getting as close to zero incremental tax as possible. Outcomes depend on the plan's rules and your facts, and they aren't guaranteed. We cover year-round harvesting and its wash-sale rules in our year-end portfolio reset.

A 10b5-1 plan is a legal wrapper. The outcome comes from the rules you put inside it. Many people focus on the compliance benefit and skip the harder questions: how much to sell, how fast, and where the proceeds go. Adam says the liquidity need should shape the schedule, whether it's tuition, a house, or pure diversification. For senior executives, so should how the selling looks to the market.

The second thing people miss is timing. Because of the cooling-off period and the roughly 12-month commitment, the plan has to be built before you need the cash. If you wait until you want to sell, you may miss the next vest. A related catch is that selling a lot at a loss near a new vest or ESPP purchase can raise wash-sale questions, so lot selection is worth reviewing with a tax professional.

Here's an illustration, not a client and not Adam's. Say a public company executive holds 5 RSU lots of 1,000 shares each, and the stock trades at $70. She wants to raise $210,000 by selling 3,000 shares. Her lots look like this:

• Lot 1: $30 cost basis, a $40,000 gain if sold.
• Lot 2: $50 cost basis, a $20,000 gain if sold.
• Lot 3: $68 cost basis, a $2,000 gain if sold.
• Lot 4: $85 cost basis, a $15,000 loss if sold.
• Lot 5: $78 cost basis, an $8,000 loss if sold.

If she sells Lots 1, 2, and 3, she raises $210,000 and realizes $62,000 in gains. If she sells Lots 3, 4, and 5 instead, she raises the same $210,000 and realizes a net loss of $21,000 ($2,000 of gain, less $15,000 and $8,000 of losses). That's an $83,000 difference in realized gain on the same sale amount. The catch is that the low-basis lots stay in her account with their embedded gains, so the gains are deferred, not erased. Wash-sale rules and her tax bracket also matter. The figures are hypothetical and for illustration only.

At Tailored Wealth, we treat a trading plan as one tool inside a larger plan. Our Equity Compensation Playbook is a written set of rules, set in advance, for what you do at each vest, exercise, and sale, including whether a 10b5-1 plan is part of the answer. We revisit it in our Quarterly Strategy Rhythm, a set quarterly review of your whole financial picture, so the rules keep pace with your compensation, your taxes, and your goals.

This conversation is for corporate executives in their 40s and 50s with household income of $500,000 or more at public companies, where RSUs, ESPP shares, or options make up a meaningful share of pay and net worth. If you face blackout windows, monthly or quarterly vests, or a pile of lots at different cost bases and no written plan for selling them, this is the kind of situation we help with.

If you hold company stock at a public company, it helps to have a second set of eyes on your vest calendar, your blackout windows, and how your selling rules fit the rest of your plan. Book a free Wealth Strategy Call and we'll talk through your equity, your taxes, and your timeline. It's a conversation, not a sales pitch.