Navigating concentrated stock positions: Pre-retirement strategies for CPAs and their clients
October 30, 2025
by Alex Canellopoulos, CFA, CFP® and Rob Greenman, CFP®, Vista Capital Partners
Why this matters
For many executives and long-term employees, company stock has been the cornerstone of their financial success. Years of stock awards, option exercises, and reinvested dividends can turn into a position worth millions. While this looks like a dream scenario on paper, it carries a hidden challenge: too much of a client’s wealth tied to a single company.
For CPAs, concentrated stock positions are worth paying close attention to. They often appear on tax returns long before clients recognize them as a financial planning issue. Because of this, CPAs are frequently the first to spot the risk. Knowing when to raise the conversation and when to involve an advisor can make a tremendous difference in helping clients protect and maximize the wealth they’ve worked so hard to build.
What is a concentrated stock position and how clients end up here
There is no universal definition, but most professionals consider a stock “concentrated” if it makes up more than 10% of a client’s total investment portfolio or more than 25% of their overall net worth.
Take, for example, an executive who joined a publicly traded company early in their career. Over 25 years, their annual option grants and restricted stock awards could grow into a single position worth $2 million or more. Even if they’ve built other assets along the way, the employer stock could still represent a significant part of their total net worth.
Clients rarely set out to create concentrated stock positions. More often, they develop gradually. Stock compensation plays a central role, with RSUs, incentive stock options, and non-qualified stock options forming a meaningful part of total pay. When the company performs well, these holdings compound much faster than the rest of the portfolio.
Behavioral tendencies reinforce the problem. Investors naturally hold onto their winners, reluctant to part with stocks that have delivered such strong returns. The tax implications of selling further discourage diversification, leading clients to delay action until the position has grown uncomfortably large.
By the time retirement nears, the position often requires attention. That’s when CPAs are positioned to help frame the risk, open the discussion, and coordinate with advisors on strategies to gradually reduce concentration while keeping tax and retirement planning objectives in mind.
The risks of concentration
The most obvious risk is downside exposure. A single negative earnings report, regulatory change, or industry disruption can dramatically cut the value of a client’s stock and with it impact their retirement plan.
On the flip side, concentration is often the very thing that created their wealth in the first place. A company’s long-term growth story turned stock awards into millions, which makes it psychologically harder for clients to sell. This mix of pride, loyalty, and fear of missing out often leads to inaction at precisely the time when diversification is most important.
But the data is clear: since 1926, 58% of all individual stocks have failed to outperform Treasury bills. More striking, just 4% of stocks have been responsible for the market’s overall long-term returns above Treasury bills. This reinforces the desirability of broad diversification, which increases the odds of holding future winners, and highlights why a buy-and-hold approach works best when applied across a diversified portfolio—not a single company’s stock. (Bessembinder, Hendrik, Wealth Creation in the U.S. Public Stock Markets 1926 to 2019 (February 13, 2020).)
Strategies for moving from concentrated to diversified
When the time comes to reduce concentrated positions, there is no one-size-fits-all solution. Each strategy carries trade-offs between taxes, timing, flexibility, and complexity. CPAs and financial advisors can play a key role in identifying which approaches may be most appropriate and ensuring they align with the client’s broader goals.
Here are several commonly used strategies:
Rip the band-aid: Selling all or most of the stock at once provides immediate diversification and removes risk quickly. The trade-off is a potentially large tax bill in the year of sale.
Dollar-cost averaging / cap-gain budgeting: Selling portions of the stock gradually, whether on a set schedule or within an annual capital-gain budget, spreads out the tax impact. Diversification is gradual, but so is the tax liability as it is spread out over more than one year.
Separately Managed Accounts (SMAs): With an SMA, concentrated stock is integrated into a custom portfolio, allowing for tax-loss harvesting and targeted diversification over time. For example, we’ve worked with executives in the tech and footwear industries where utilizing an SMA helped reduce concentration while improving after-tax outcomes. Strategic planning and some realized taxes may be required to employ this strategy successfully.
Exchange funds: These allow investors to contribute concentrated stock into a pooled fund and receive diversified exposure in return. The drawback is that to benefit from the tax-deferral the tax code requires a lock-up for 7 years, which reduces portfolio liquidity.
Charitable giving: Donating stock directly to a donor-advised fund, private foundation, or charitable trust allows clients to avoid capital gains tax and receive a charitable deduction, while supporting causes they care about.
Other tools: Strategies like stock protection funds, option collars, and variable prepaid forwards exist, but they often come with high costs, complexity, and limited flexibility. For most clients, simpler diversification approaches are more effective.
When should CPAs raise the issue?
A key question for CPAs is knowing when to initiate the conversation. A few common trigger points include:
• When employer stock shows up as more than 10–15% of reported taxable dividends or capital gains.
• When a client is entering their 50s or early 60s with a pending retirement date.
• When stock sales have been deferred year after year to avoid realizing taxable gains.
These cues often surface during routine tax preparation, giving CPAs an early opportunity to flag the risk and start the conversation well before retirement is around the corner.
Estate and legacy planning considerations
Reducing concentration isn’t only about retirement, it also ties into estate and legacy goals. Charitable gifting strategies can unlock meaningful tax benefits while aligning with philanthropic intent. Step-up in basis rules at death may also influence whether stock is sold during life or transferred to heirs.
For example, a client may choose to hold shares with the largest unrealized gains until death, ensuring heirs benefit from a step-up in basis, while selectively selling shares with smaller gains during life to fund retirement or charitable giving. These conversations are natural points of overlap where CPAs and advisors can work together to balance tax efficiency with long-term wealth transfer goals.
Bringing it all together
For CPAs, concentrated stock positions represent both a risk and an opportunity. Clients often don’t recognize the problem until it’s too late, but CPAs are well-positioned to spot the signs early. By framing the risks and coordinating with advisors, CPAs can help clients diversify at the right pace, minimize taxes, and integrate stock positions into a broader retirement plan.
Done thoughtfully, the process helps clients preserve the wealth they’ve built while giving them confidence about their financial future. For CPAs, it’s another way to deepen client trust and demonstrate the value of being both proactive and collaborative.
Rob Greenman, CFP® is chief growth officer at Vista Capital Partners. He is a CFP® holder and is a past president of the local Financial Planning Association. Alex Canellopoulos, CFA, CFP® is director of investments at Vista Capital Partners, where he conducts market and performance-related research, stays on top of market trends and academic studies, and simplifies portfolio construction while enhancing the investment experience for clients.
