Concentrated Stock Solution

Holding Too Much of a Good Thing?

A concentrated stock position — where a single holding makes up more than 10-15% of your total investable assets — often starts as a story of success. It might be company stock that grew beyond expectations, a savvy early investment, or a family inheritance.

But over time, having so much wealth tied to one stock can also expose you to risks such as:

Unexpected market swings that can dramatically impact your net worth
Big tax bills if you sell to diversify
Limited flexibility when life or goals change

Speak with a Senior Wealth Advisor Today

Call 631.218.0077 or keep reading for more information.

Exploring Your Options

There are many ways investors try to diversify a concentrated position, each with its own set of trade-offs:

Outright sale: Converts shares to cash and enables broad diversification immediately, but may trigger substantial capital gains taxes.
Charitable giving: Donating appreciated shares through a donor-advised fund or directly to a charity can avoid capital gains and support causes you love, though it’s irrevocable.
Gifting to heirs: Shifts wealth to family, potentially reducing your taxable estate, but your cost basis carries over.
Exchange funds: Pool your stock with other investors to achieve diversification without an immediate sale, but often require large minimums, long lock-up periods, and are limited to accredited investors.
10b5-1 plans: Allow executives to systematically sell shares over time, helping avoid insider trading concerns, though flexibility is limited once the plan is set.
Covered call strategies: Generate income while holding your stock, but cap upside if shares rally. Each path can play a role in reducing concentration risk. But most either trigger taxes today, tie up your money for years, or relinquish control.
Variable Prepaid Forward Contract (VPFC): Provides upfront cash by committing to deliver shares in the future, potentially deferring capital gains taxes and retaining some upside, though it requires complex structuring and limits flexibility.
Section 351 ETF conversion: Contribute your concentrated stock to a specially structured C-corp that converts into a diversified ETF, deferring capital gains taxes in the process. It’s a powerful way to maintain control and diversify without an immediate sale, though it involves specific requirements and legal structuring.

Each path can play a role in reducing concentration risk. But most either trigger taxes today, tie up your money for years, or relinquish control.

A Smarter Way to Diversify

For many of our clients, we’ve found a lesser-known but efficient approach. It’s a strategy that lets you:

✔ Defer capital gains taxes: Keeping more of your money working for you today.
✔ Achieve real diversification: Reducing single-stock risk in a tax-efficient way.
✔ Maintain flexibility: Daily liquidity and no long lock-ups.
✔ Transparent costs: With the familiar structure of an ETF.

As with any tax-oriented structuring strategy, eligibility requirements, IRS scrutiny, structuring and ongoing costs, and the possibility that tax treatment could be challenged or change are all material considerations. This approach will not be suitable for every investor, and no tax outcome can be guaranteed. We encourage you to discuss the specific risks and limitations applicable to your situation with your advisor and tax professional before proceeding.

Curious If This Could Work for You?

We’ve created a simple guide that explains exactly how this strategy works, who it’s right for, and how it can transform a concentrated position into a more balanced portfolio — without writing a large check to the IRS today.

CLICK HERE TO DOWNLOAD OUR FREE CONCENTRATED STOCK SOLUTION GUIDE