00:00 - 00:23 | Max Pashman:
It's amazing the feedback you get from people working with fee-only advisors. It's just remarkable the differences. Way less complaints, positive feedback. There's the trust component because like everyone feels like they're being sold something. That's just how the industry has worked. And it's like, I don't know how we got to that point. Making this transition is just like, it should be the standard. That's just like the battle that we have behind the scenes.

00:25 - 02:35 | Christopher Nelson:

Welcome to the podcast for financially focused technology employees. Are you working for equity? Do you have questions on how your career and money work together? Then welcome. Every week we discuss strategies and tactics for how to grow your career, build wealth and reach your financial and lifestyle goals. Thanks for joining Tech Careers in Money Talk. I'm your host, Christopher Nelson. Today, we're going to talk about financial advisors and what are some big mistakes that technology employees are making with their equity today. So financial advisors, when I say that, many people think, why do I need a financial advisor? There's robo advisors or assets under management. Incentives aren't aligned to manage me to success. They're just going to try and sell me something. Well, there are fee only financial advisors that do provide great planning services out there. And we're going to talk to Max Pashman, who's going to tell us why he left the industry, a larger industrial shop to then serve technology employees and sales professionals who get equity compensation. We're also going to dive in in the second half of the show. And this is what I think is really important is Understanding what are five of the biggest mistakes that technology employees make around equity and finances so that you can avoid it. We want to make sure that you are prepared to make the biggest decisions that you have around equity and around your personal finances. So stick around for that in the second half of the show. Let's now go meet Max. All right, I want to welcome Max Pashman to the show. Max Pashman is a certified financial planner who has his own fee only practice that is built, you know, purpose driven to help technology and sales professionals that get equity compensation, which is so needed. And also he is phenomenal on creating these graphics on LinkedIn that simplify complex, financial concepts into literally single views. I am looking forward to this conversation today. Welcome, Max.

02:35 - 02:42 | Max Pashman:

Yeah, I'm happy to be here. It's a pleasure to really just talk about everything that you just mentioned right there and really excited to dive into this.

02:42 - 03:03 | Christopher Nelson:

Well, yeah. Well, let's not pull any punches. You write on your about page on LinkedIn that you were did not see that your future lied in institutional financial advising, financial planning, and you said, I need to make a move. Help us understand what did you see and discover that was the impetus for your practice today?

03:04 - 05:08 | Max Pashman:

Yeah. So for a little context, before I pivoted into my own field, I was working with a couple of different employers. Most of them were primarily in the broker dealer space. And I had learned a lot in my journey leading up to where I am right now. And certainly awesome people that I was able to collaborate with, learn from. and build my practice initially around and really just becoming the person that I am today. And what I eventually realized working at a lot of the different companies is that I was not very much aligned in the systems that were set up on the back end. I tell this to a lot of people that most financial advisors are very much dedicated to serving people and they have a lot of compassion to serving others. But I felt like the model that they were under, specifically in a lot of the previous ones that I was in, didn't really reflect that. And after trial and error and doing my research, I basically had made the jump to starting my own practice. And initially I was looking for perhaps like a different employer to actually work with, you know, like a fee only advisor, which is the field that I'm in right now. But I felt like the way that I wanted to deliver it wasn't really reflected with a lot of the places I was looking for. And they were looking for a very specific clientele, like specific, like ultra high net worth. And there's nothing wrong with that. But I wanted to serve, you know, like families as it was like middle class or even like even high net worth. But I wanted to provide that range of people that really wanted the plan, but also the ongoing piece of it. So I decided to go on my own. And I left with good terms with my previous employer, we had our differences leading up to where I am. right now and today I'm able to create a practice for myself where I can really engage with my clients in a way that allows me to be detail-oriented in holistic planning overall.

05:08 - 05:52 | Christopher Nelson:

So there's a few things I want to… double click on there. And first and foremost, I want to say thank you, because I know from my personal experience that I believe that there's an underserved community that are the people who are $1 million net worth to $10 million net worth. I believe that that's an underserved community. And we're either pushed down to a level of service that just does not meet what we need, or these larger firms are looking for the $10 million net worth and above and just aren't really providing that. So number one, I want to say thank you to serving this community because I think that we definitely need the help.

05:53 - 07:24 | Max Pashman:

Yeah, certainly. So I mean, it feels like a, an audience that as I have seen, has not been really heard or paid attention to. Because what I had found is a couple different things about the audience that I serve. A lot of them are very much high earners. Like it's not like they're like living paycheck to paycheck, so to speak, but they haven't translated that into building wealth for themselves. So that was the first thing. And then the fallacy that I saw in the old business model is, you know, we would see a lot of advisors that say, you need to basically have a minimum amount of assets of this amount, like what you just said, like a million dollars or so. And a lot of these people just don't have it. They're trying to get up to the first million dollars. And it's like, where's, how do we serve that disconnect? So that's where I position myself is like, I don't require any like assets to be handed over to me, even if you like did or did not want to move forward with that. It's more so like, do you have the ability to hire a fee-only advisor? And are you looking for ways to, in that accumulation period, how are you using that for yourself? And then the other part is, they may have a lot of assets for themselves, but they're tied into illiquid assets, whether it's the real estate or even private equity, and they don't have that extra amount on the side to invest with. So it's like, how do you serve those people? it felt like there was a very large demographic that I wanted to serve in that regard and make sure that they were being heard and understood and served.

07:24 - 08:37 | Christopher Nelson:

And that's so important because, you know, many of us, I mean, we're trying to pursue the American dream, right? And it's, you know, I went from a scenario of, you know, zero to multiple seven figures wealth within a two-year period when I really started, you know, focusing on some of these pre-IPO companies and The one thing that helped me tremendously, and this was, as I mentioned before, as I told you before, was in 2012, is finding a fee-only advisor. And I want to really break this down for people because I felt a tremendous amount of relief when I could have all the planning conversations and there was no pressure around controlling or managing my assets. And the reason being is not because I didn't trust them that they could do that well, I didn't know what were the best decisions for me. And so when you think through fee only versus the more traditional model, Where does fee only have that advantage of helping clients get educated and see a plan versus the other model that I think doesn't really build trust?

08:37 - 11:22 | Max Pashman:

Yeah, well, I think it's important to kind of break those down specifically and distinguish the two. So the two models is fee based. That's the traditional model that we have seen. And basically what that model is, is that you can charge for financial planning services, but you could also receive commissions on top of that. versus the fee-only model basically focuses on only the financial planning services and no commissions. So anyone that is a fee-only advisor, a true one, receives no commissions from a third party. And so we're able to remove that sense of conflict of interest and remove that incentive right there and basically try to make sure that we're focusing on that. Now, with that being said, there are different ways that a fee only advisor could work. And we traditionally see three types of methods. And when I say methods, it's really just like down to how they charge, right? The first one is the AUM model. That's the traditional one. Even we see that with fee based models, which is they will charge you a percentage of the assets that they will manage on your behalf. We see something like 1% or even cases like 2%, right? So it's basically what they're charging on the portfolio you hand over. But then there's been newer types of models that a lot of advisors have embraced. There is the flat fee model. which is basically you pay the advisor a stated amount whether it's for a limited basis or an ongoing basis. The limited basis could be like a project base where you work with an advisor for three, four months on the plan and implement it versus an ongoing piece which would be you pay consistently and that could be like a subscription model, for example, where there is ongoing work. after that. And then the third model is the hourly model, which is the advisor will work with you for a specified amount of hours and they will charge you by the hour and they can vary by advisor. And even all of these models are varied. And that's just basically how they value their business, which is not a bad thing. You know, it just comes down to the value you get, but it's important to recognize that you know, when you work with a fee-only model, you remove the commissions that are behind the scenes. And it's up to you when you work with the fee-only model, what kind of scope you are looking for. Do you want them primarily to like manage your assets? Do you want to work with them on a limited basis? Or are you looking for the plan and an ongoing basis? But that's how we're able to separate ourselves is just really being transparent with the business model that we are only charging you and no one else in between.

11:22 - 11:53 | Christopher Nelson:

Right. And that that to me is just so important is to be able to unwind that. And, you know, one of the things I think that I would like to educate people on, Max, is when when people want to understand what type of advisor they're engaging with, what are some of the questions that they would ask to designate, you know, what side of the two buckets they're on, the commission or non commission, and then sort of walking down on the fee only side, how that they how they could engage.

11:53 - 12:13 | Max Pashman:

Yeah, so I would start with the first thing that I brought up is, are you fee based or are you fee only? That will narrow down whether they get commissions from a company, whether they're working as like a captive agent, like they're on a contract with the company as an employer, working on a quota basis to sell like a product specifically. And then I would- Can I-

12:14 - 12:18 | Christopher Nelson:

Can I stop you right there real quick? What's an example of a product that they would sell?

12:18 - 13:08 | Max Pashman:

Yeah, so like the most common commission-based products would be an insurance product or if it was like an investment fund, like a mutual fund. So those are like primarily the two types of products. And I just want to preface and say there's nothing inherently wrong with these products, so to speak. But Um, I don't think that the products should be motivating advisors to create the recommendations. It should be the other way around that the recommendations should actually motivate you to recommend a product sort of speak. But right. Even still, what we want to do is make sure that as an advisor, we can remove those conflicts of interest so that when we do recommend this insurance product and this investment, it's because we believe it's in their best interest, not because it's going to get us another dollar in our pockets as a result.

13:08 - 13:58 | Christopher Nelson:

Right. Right. That's that's where things get confusing. This is where incentives don't get aligned. And I think this is what creates sort of the mistrust between the client and the actual advisor. So that's on the the fee base. So then on the fee only, it sounds like some of the questions that people would want to ask are, you know, how do they engage? How do they actually what are the fees that they take? And, you know, can You know, and I think it's important as a as a customer to be able to walk in and say, I am I do know what I'm interested in off the menu. I want to put together a plan. And in that process, I want to understand if we could work together and what does then long term, you know, fees look like if we're going to work together? Does that sound like a reasonable ask to engage a fee only financial advisor?

13:59 - 15:21 | Max Pashman:

Yeah, it is. And particularly just like the scope of their services and the duration of their service, because there's advisors out there that will only work with people on a limited basis, right? They'll only work with them on for a couple of months, while there are other advisors that want to work with people on an ongoing basis, I'm one of those advisors. So that's why I have the subscription model. But then there's other advisors that want to work specifically in a short period of time, and that's perfectly fine. It's just a question of, is that the model you're looking for? Because I think that what we are starting to find is that the more disciplined type of clients kind of want to go with the limited basis, whether it's like flat fee or an hourly basis for a limited time, because they're confident with them managing all their finances, and they're just looking for a second hand in for a short period of time. But then there's the other crowd, which is, you know, maybe they're they are good with their money, but they just need the discipline, they need the accountability, and they just need someone there to just make sure that they are being or they're executing on their recommendations accordingly, and they want to meet with someone accordingly. So it just comes down to your personal preference, but by understanding the models in question, it gives you a sense of the type of engagement process you can expect with that fee-only advisor.

15:21 - 17:43 | Christopher Nelson:

What I think is so important is, yeah, building a good relationship, understanding what you need, and then also It's important that you understand that your needs can change over time I know that as we were growing a family and we were very disciplined people But then we had a son and then 18 months later. We had identical twins we we had to tap out and we had to then bring in and Get somebody to help keep us on track and we went back to this, you know, so we had essentially When we went through the first IPO and we had this crazy sudden wealth event that created also a lot of depression, anxiety, frustration because I wasn't sure what to do or who to talk to, we did a search and we found a Fee-only financial advisor that we said we want to engage and just get a plan. We want to have a fixed amount Let's go get a plan. We did something a three-month engagement where we had multiple meetings We did things and we built a relationship and they gave us, you know, great advice. They gave us a very comprehensive plan they gave us strategies to think about and one of the things that was also amazing too is they recommended a great CPA who, while she wasn't a certified tax planner, she definitely had a wealth of experience with, you know, tech stock because she's been in the Silicon Valley since the 70s. So she had tons of experience. And then also, an estate lawyer who helped us craft our first living trust. And then when we got to the situation where we couldn't manage anymore, it was very natural for us to go back and say, can we engage you for the next couple of years to make sure that we're sticking to the plan because we're like buried in diapers? And so I think it's important to share. And this is why I love having conversations with people like yourself, Max, where, you know, I get a chance to look into the past and say, hey, people like you who are doing what you did, help me out. And then also letting know, you know, to people that are listening like this, this is a scenario that can work for you when you're trying to gain knowledge, and then also slowly build a relationship with somebody that you can trust without, you know, all of a sudden moving your entire portfolio under management.

17:43 - 18:42 | Max Pashman:

Yeah. And that's the thing is the flexibility is there. If you need it, you know, like whatever type of direction you are looking for, you have the options. And that's what, you know, I really like about the fee only model is like for me, just, you know, as a financial planner is I could choose what direction I want to go. And it felt like in the previous models being in, you know, a fee based model, it was like, there were really two models. It was, um, you know, like primarily just sell a product or, acquire assets and those were like really it. And then you would do whatever after that here. It's, it's a little more defined. It's a little more transparent as far as this is exactly what you are paying for. And this is the exact dollar amount. And this is the scope services that you are going to be paying for behind it. So it's certainly there. And it gives us a little more focus to focus on. The actual plan itself and not inherently just the products that we're recommending behind the scenes.

18:42 - 19:14 | Christopher Nelson:

Well, and I was actually going to comment on that is now in your practice. Now, how much time are you spending on core planning versus before? I'm sure I don't even know. Are they are in your in previous roles? And I don't know if you can talk about this or not. Are there quotas and things that you have to meet? Or is it more personal of, oh, if I sell this, I get this? Versus now, you get to actually dedicate time to helping people work through a financial plan, which I know has got to be more of the emotional reward, right?

19:15 - 20:36 | Max Pashman:

Yeah, you know, that's the thing is that working at virtually most broker dealers, like the ones that I was at before, there were quotas behind it. So if you weren't hitting your quota, you would want to delegate a lot of your time towards just making sure that you get through the next day until You know, you get through working in plans versus this time. It's like, this is my own quota, right? I'm a business owner now. So now I dedicate that towards the craft. And even still, I've set my practice up where there is a little more accountability on my end because I clearly state like what we're going to do throughout the year. We're going to meet on these dates right here. I'm going to deliver these things. We're trying to get to these specific results. You know, it's not like hands up in the air. Let's see how the market does next year. There are pieces of action that I want to make sure that you're actually hitting because this is what you're hiring me for, right? It's like you want to take action on this on an ongoing basis. I feel like not only am I spending more time in my practice, but I'm enjoying it too, even more. Not that I didn't before, but it feels like what I am doing now feels like what I always thought financial planning was when I started working in the industry almost 10 years ago.

20:37 - 21:23 | Christopher Nelson:

Yeah. And let's I want to I want to spend a little time and just go down that direction for a moment, which is, you know, your craft. Right. And I love the way that you describe that. I'm a huge fan of Cal Newport. So good. They can't ignore you. And he talks about, you know, becoming a skilled craftsman and the way that you talk about it and the way that you write about it, too. You know, I'm a huge fan of. And so now, as you've spent time developing your craft, you know, help me understand like what, you know, how do you look at that holistically? What are some of the things, you know, is it really more of, you know, plan set up or guiding people through execution that, you know, you really see as a role that you're finding fulfilling or where you're trying to hone and shape things?

21:24 - 23:44 | Max Pashman:

Yeah. Well, you know, I personally just love to put these plans together for new clients because everyone's situation is different. It's never the same. So it's kind of that complexity and trying to really make sure that, you know, even though your situation is complex, I can be that solution provider and I can provide that clarity. But I think the most fulfilling thing is just the amount of stress that gets relieved from them as we meet onwards. When people first reach out to me, they're just like, I'm clueless what I'm doing or I do know my finances, but I don't know if I'm on track. And that lack of peace of mind, it drives people up the wall. You can just see it when we're having our conversations. I've even been in discussions where people are crying in the first one because they have just a huge relationship emotionally with their money. And it's awesome that as we continuously meet up because you know, I'm really dedicated, making sure that they're moving the needle, it's awesome to look back and reflect that, you know, like, it's the annual plans that I love to make for clients, you know, thereafter, because you can actually see like, this is where we started with, this is where you are at right now. And the reason why I love doing that is because sometimes when we get into that meeting, people are like, I don't feel like I made progress, or I don't know, like what I've done, I feel like I've gotten worse. And it's not because of working with you, which is like, because of how I am. And I'm like, right, um, actually, you're making tremendous progress, look at what we started with. And look, we're at right now. And that sense of confidence they get from that meeting, whether it's building their emergency fund, paying down debt, getting X amount of assets in there, you know, getting more organized, it gives them the confidence to keep on building on to it. So it's, it's nice to actually see that from people to say, I feel way more confident with our money, because At the end of the day, when it comes to personal finance, it's all emotional, it's all mental, just the relationship with it. So it's, it's nice to be that guide, and to see how they can, we can turn what it was a negative situation in their life into a positively motivating one for themselves.

23:44 - 28:23 | Christopher Nelson:

That's so good. And it's so it's so important in technology and people that have equity compensation because there's not a clear roadmap or there's not education to how to manage that. And so when we go there, we know instinctively like this is good. Like if I am able to get money and comp like you can see from examples, OK, this is beneficial. What people don't realize, except I think, you know, people who listen in like they get it, they're listening for this is When all of a sudden the money starts coming in, and you're right, and that starts off like getting a nice high salary, getting a bonus, and then the equity could be private and you, I don't know what's going to happen. And all of a sudden you go through a liquidity event. and now you're looking at hundreds of thousands of dollars, it's very easy to go from, oh, I've got my things in order because I understand budgeting. I've got a little bit in the bank. I've got a little stock portfolio. Then when all of a sudden you have this, and I'll speak technically, which is you have an overweight, undiversified, large equity position, or For those who may not understand those terms, it's really like you have all this money in a single stock. For myself, you probably haven't heard this story, Max, but on April 19, 2012, which was the IPO day of Splunk, I drove in in the morning and my wife and I just were high net worth earners. We walked into this event. It was super early in the morning, downtown headquarters in San Francisco. The executives were in the NASDAQ. It was being streamlined. We DJ was set up, Omelette Bar, and everyone was sitting there because we all knew. Nobody really talked about who had what amount of shares, but we all knew that this could be impactful. And we knew that the price that it was set to go out at was $17. And we knew that many of us that day were going to become millionaires. Then when it was time to go out, they said, okay, we're going out and we're texting people who are literally live in there and we're watching it on TV. Okay, what price is it going to go out at? The screen was blank, like it didn't record anything. And this went on for one or two minutes and people are getting nervous. We thought, did the system go down? We're tech employees, so do we get hacked? And what it was is the people who were selling were holding, they were driving up the price. So literally, Max, within the span of five minutes, you have a number in your head that was 17 it ends up going out of 34 within seconds it doubles it doubles so as soon as it goes out you know the dj hits we have this crazy party and it was this amazing day and when i went home that night and i saw my wife who's pregnant at the time um She said, okay, when do we get the money? When can we buy the house? She's all nesting. And I literally walked into the next room and fell on the couch and cried because I didn't know. We're in this lockout period. It's on the stock. I fought so hard to get to that moment. that I didn't know what to do beyond it. And this is where I'm sharing this because it was finding a fee only where I could ask all the questions that I wanted to. Because this is where many of us technology employees are super analytical. We want to know the details. We want to know what's this and what's that and what's that. And I'm just saying, thank you for doing what you do, because I think that you are saving a lot of mental stress, a lot of mental headache, because it was for for at least a week after that, I was I went from this high And this is the whole thing is what people don't understand. And this is where we need people like you to be able to talk to because I was depressed. I was literally depressed because there's this underlying fact that I didn't want to be the guy to screw it up. I didn't want to get to that point. You get to the point where you have all this and then you just screw it up. And I didn't also want to be, and you can screw it up by what? By going to somebody who's a charlatan and then they do all these things and you're not really sure what's happening. So we crave knowledge. This type of relationship is super healthy. I know that was a bunch, man. But I do want to say, like, I think that you're doing good work for the people, man. Thank you for serving the technology employees and the sales employees as well.

28:24 - 30:03 | Max Pashman:

Yeah, I do appreciate that. And you know, I sympathize with a lot of tech employees, because, I mean, for the, you know, for the most part, every single person I serve, or I've come across, they're amazing employees, very intelligent, they know their stuff. from beginning to end. And then you throw the role of equity at them and some get it and a lot are lost. And I don't blame anyone for not being able to stay on track with it because it's a lot even for financial professionals to keep up with or to learn initially. So I can only imagine what that overwhelming feeling, what that actually feels like when that is thrown at you and you're kind of expected to just like know everything from beginning to end because there's so many different types of equity. There's so many different types of tax implications, strategies behind it, and like what to do with it. So I get it. You know, I get why that would be such a stressful thing to think about because when there are things that are in the back of your mind in uncertainty, it drives you up the wall. It's just like you don't know what to do. And that drives a lot of bad financial decisions, by the way. It's like, When you don't know what's going to happen next, you get irrational, you get emotional. It's why it's the center of the culprit of bad short-term impulses. It's because of just what we don't know. So we just act rationally. And if we don't have the right support system or the right person to go to, you know, we're kind of just driving blind and crossing our fingers. And I want to avoid that at all costs for people.

30:04 - 30:59 | Christopher Nelson:

That's great. And that's actually a phenomenal tee up. We're going to take a little break right now. And then we want to come back and Max and I want to just share what we think is the five mistakes that tech employees make with equity and finances and call those out so that you don't have to. So hold on. We'll be right back. Okay, and welcome back. We're back for the second half here with Max Pashman, and we want to talk about five mistakes that tech employees make with equity in finances. And I think the number one that we both intuitively agreed upon is there's no plan for their equity. No plan. And what happens like when people come into you, I'm curious, is this really the number one problem that you see that they come in and they say, OK, I've got all this equity. I don't know what to do with it.

30:59 - 33:20 | Max Pashman:

Oh, absolutely. I mean, there's so many different problems and strategies to approach it with because, you know, it's like, awesome, you got this equity from your employer. And it's just like, what do I do with it? You know, and it all depends on the type of equity, whether they're RSUs, ESPPs, ISOs, NSOs. It depends on what stage you are in the company that you're at, because if they're illiquid and locked up, what are the taxable repercussions that you need to be aware of when that happens? And ultimately, there is no game plan for it. You know, if you at least know that it's vested, it's yours to keep. There should be an intent behind that if you know that there's going to be a payout later down the line at some point. And what it ultimately boils down to is not just the intent behind it, but there's also the taxable repercussions that we have to be aware of, especially when it comes to stock options. We've seen some stories floating online about improperly exercising an ISO. And not really understanding the difference between what the taxable repercussions are between an ISO and an NSO. We don't have to get in full detail. But there is this lack of knowledge as far as what should I do? And where should I put it once I have the equity? Because then once it's yours, okay, awesome. Now you have a concentrated position. What are you going to do with it? Are you going to hold on to this forever? Are you able to handle the volatility that comes with it? Or are you banking too much of your future in a single company? You know, I talk about it a lot with my content about, you know, like concentration is good in some areas, but you don't want to be over concentrated and, you know, like bank your entire future on the success of a company, right? So it's important to understand not only how you are using that equity, but how are you trimming it down? How are you using the proceeds towards your goals? Why are you doing so? And how are you doing it in such a way where it doesn't like result in a massive tax liability when it could have been done a little more efficiently towards your other financial goals? So no plan on it. just brings a lot to the table. And it's the number one reason why a lot of people that equity compensation even reach out to me in the first place.

33:20 - 36:00 | Christopher Nelson:

Yes. And I see that as well, too, in a lot of conversations that I have with technology employees. And I'm really trying to get people to take it upstream to thinking about when they're trading their time and talent, when you're going to work for a company, you should be choosing the company based on the equity that you want and how that aligns with your financial plan. So here's an example. I knew a guy who really wanted to start investing in short-term rentals. We'd met at a real estate conference. He was a technology employee. He was working for a startup company. And he was a staff-level engineer. And all his equity was locked up in all this early-stage private company. He wasn't sure when it was going to go public. So we had a conversation and I said, when you're thinking with your time and talent, you know, because this is where I'm more of a career and money strategist. So I'm not, you know, planning their finances. But I'm saying when you invest your time, what's your plan? Well, you want money now? Well, then you need to be looking at your low risk, low reward. You need to be looking at public companies. He was taken back by this. But I said, go get some offers and let's see what's out there. And when he got some different offers, one of them was from a ride share company that was offering to match his salary. So he's a staff level engineer. So making $250K a year was going to give him $250K in RSUs. that had downside protection, meaning that if the stock value went lower than that at the end of the year, they true him up with shares. So he's pretty much, you know, guaranteed using air quotes as much as you can 250 with another 250 liquidity in the first month. He ends up taking the offer. It happens to be, and this is where sometimes I think opportunity and hard work meets luck, which is the stock price that he got his shares granted at were 21 bucks a share, shot up to 61. He ends up strategically harvesting it and taking I think by the end of the 18 months he worked there, like 1.2 off the table, right? And again, I don't know how much was taxed. I think that was a gross number. I don't know if that was a net number. But again, it's an example of where, and this is what I'm trying to teach people, because I agree, everything that Max says is sometimes people come to him thinking about, okay, here's all this equity I got. But even taking that upstream and understanding what equity do you want to work for? How does that align with your financial plan? that you're trading your time and talent for because then when you start getting the alignment further upstream, this is where I think you're going to be able to then generate more out of your career and the equity combo in the long term.

36:00 - 37:42 | Max Pashman:

Yeah, and I tell this to everyone even like in my own content. A question of like where you should be putting your money comes down to when do you need your money? You know, like a lot of the investing questions that you have can revolve around the answer that because look, remember when it comes to equity, it may be stock. It may be, you know, ownership of a company, but they do throw the word compensation in there for a reason because it is, you know, like you should almost treat it like an alternative form of salary. Yes. Right. So if you are, if like, imagine that you weren't able to get everything. all of your equity there vested immediately and you had all the cash, what would you do with it? Would you fund a couple of projects? Would you spend it? Would you want to keep it invested over the long run? Questions like that ultimately dictates what you should actually do with your equity at the end of the day because once you put intention behind it, you're offsetting a lot of the risk that you otherwise would not want to take inside of it. But ultimately you're being a little more strategic in the sense of, I know I want to spend this now. I want to use this later. But ultimately you don't want to just park it on the side and just say, I just want to leave it there just because it's equity. It's listen, you earned it. You earned your equity right here. Do you want to like utilize it right now? And if not, what are some methods that actually aligns with your investment philosophy and your strategy? So there's a lot to unpack just by really getting in the mindset of thinking like it is stock, but it is like an alternative form of salary. It's up to you what you want to do with it right now.

37:42 - 39:40 | Christopher Nelson:

It is. And this is where I think having a tops down financial plan is so critical. Right. I do want to drain. So let me drain the let me go through this this complete list, because I think we're sort of weaving in and out of some of them. And it's important for people to understand. But the five biggest mistakes are no plan for their equity, a lack of a lack of a tax professional advisor on their team, no divestiture diversification plan. No emergency planning, that could be emergency fund and state planning or life insurance depending on where you are. And then no financial goals or plan to get to financial independence. I think that's holistically the top five as we see them. And those top three are really interrelated because if you don't know or understand your equity, it's very easy. One of the things that I didn't understand When I first started to work, so in my second startup company, which was Splunk, and I signed the equity agreement for ISOs. We then, 12 months later, go through an IPO. And then all of a sudden, I'd gotten a refresh of ISOs. No, that was the first year. So then I got a refresh of RSUs. Then they started an ESPP program. And so literally two years in, I've got a bunch of all of that. And so this is where it's important that people understand that sometimes, depending on your situation, the velocity and the variety of equity that can come at you is really, really fast. So having some understanding of what it is and what I try to you know, coach people on is just be able to just have an inventory, understand what you have, what are some of the key dates and what's going to happen, because then you'll, you'll be able to go and seek, you know, partners that can give you the right advice.

39:41 - 41:15 | Max Pashman:

Yeah, absolutely. And I think that's something that's very helpful that I do with my clients that, you know, like even tech employees can do is, you know, like, I'll put together an Excel sheet with, you know, January, February lists every single month, and I will list out to them. what's happening in every single of those months. Because like I do that typically with, you know, like the situation you described is if you have stock options, RSUs and ESPP, because with the RSUs, there's a vesting schedule, right? So when are these occurrences going to happen? When are you going to purchase the ESPP? And then, you know, when you look at those things, if you're trying to tax loss harvest some of these areas, for example, it can get very complicated because it requires you to like execute some of these trades accordingly, not to mention like if there's any restricted hours in there and whatnot. And, you know, I think that organizing the dates in which these things are going to happen gives you a little more clarity as far as what you can and what you should do throughout the entire year. When to exercise, when to sell, which batches to buy or which ones to sell in that regard. So just having as much visual in the schedule that you have really helps because when you're just looking at the grant notice that was given to you and you see all that language, you're like, okay, it's going to happen this day, but let's see it visually. Let's just see how it actually happens throughout the year. So you have a little more confidence and what's going to happen to your equity throughout that period of time.

41:15 - 42:36 | Christopher Nelson:

Yes. Yes. Because then when you have that, those dates are important because that goes down to number two, when you know what you're having, then you can start putting a tax plan together around it. And I think that that was one of the things I came to understand very quickly, especially as we went through the first exit is that you have to have a tax professional in your corner who understands equity, who understands all of these nuances to help put together a strategic plan that leads to number three, which is divestiture, which is how are you strategically, and I always thought of it as, okay, I got this equity, let me just get it to this suitcase full of cash, You know, and actually then I can figure out where I want to go diversify it. But there's this, you know, I have I have the equity. I got to have my, you know, tax planners putting together the plan. Then I get to the suitcase full of cash. Then I can go think about investment. And I walk through, you know, mentally that thing, because then you can start putting your plan and saying, where do you need to deploy capital? And I like to slow it down like that because I feel or what I've heard and seen from people is they want to make moves on the street when it's like, just get it to cash, then you can have that plan when you're ready.

42:36 - 43:37 | Max Pashman:

Yeah, it's important just because You know, diversification is supposed to help you preserve a lot of what you built up over time. And there's so many ways to do it, whether it's by asset class, by income, types of accounts, the variety of stocks, like, you know, there's lots of different methods to explore as far as what you're doing to actually spread the risk. So I think it's really important to just assess the level of risk that you want to take. And really by painting out that scenario as far as like if all of your net worth is in one single stock, how comfortable are you knowing that there is a very big level of risk that it may potentially go to zero or might become the next Apple? You know, like the spectrum is wild, you know, in that regard. So it's like, do you want your net worth, your safety, your college funds to be in that bucket? It's up to you. How much of this do you want to be allocated to that? And it provides that peace of mind for you.

43:37 - 46:40 | Christopher Nelson:

Well, yeah. And so I can add a couple of stories. So one is, I have a guy that I know in my network who was a young guy, got out of school, was working for, it was actually a public company. He was getting some RSUs there. And I think he worked there from 24 to 28, like four years. And he amassed this, you know, holding that was around $2 million. And, and this is one, this is a mindset that I think is, is a, it's an erroneous mindset that I want to try and debunk here in this conversation, which is, oh, my best thinking got me here. My best thinking of going to work for this company, stockpiling all this equity got me here. I'm then going to rely on my best thinking versus years and years of investment principles around diversification. And what happened to this gentleman was The company that he was working for, which was a hardware manufacturer, got into some litigation. I think it may have involved an Apple case or something. And literally within like 30 days, the $2 million dropped down to like $200,000. And he ended up in a panic at that point. He took all of that off the table, which then he didn't have a tax plan for. And, you know, and it was just one of those things that just was, you know, emotionally took him some time to emotionally recover and literally be able to talk about that. And so I share this because there are many stories like that out there of people that have this false belief that appears real to them, which is my best thinking got me here, just stick with that. That is pride. That's not an investment strategy. That is passion ruling reason. I want to call that out. And the other thing is, I know lockout periods. We went through our first IPO, which was tremendous. And we were in a six-month lockout period. We had 95% of our wealth in a single stock. And it was an emotional roller coaster. You don't want to watch the stock price every day, but you watch the stock price every day. And then you see it shift up and down. And it's just like, oh. And so I'm telling you this because Diversification is important. And when you look at executives, usually vice presidents and above, I can't remember the name of this program. It's, what is it, 83B program? But they usually have, when you're a public company, they have a strategy where every month they have a third party that's divesting stock for them, and they're steadily taking it off the table. And this is something I think is so important for all tech employees to understand is that, The executives at the top of the food chain are steadily diversifying over time because they don't want to be overexposed in a single position either.

46:41 - 48:28 | Max Pashman:

Yeah. And, you know, we can get really caught up in, you know, that explosive growth within companies. Um, the one thing that, that drives me nuts that I see online is when I, you know, look at news articles and they always have this crazy headline. That's like, if you invested in this company in 1985, a thousand dollars, it would be worth X amount here. Right. And we look back at that and we're like, you know, that's a big if. You know, like that was a big thing too. That was a massive risk. I mean, if you're comparing, you know, like a company that was worth a couple million and it's now worth a couple trillion dollars, the level of risk that you are investing in a company like that back then is so different than it is today. And I think that, you know, like kind of what you were alluding to is like, we can get really greedy when we're making these great decisions. And so much so that like, I'm just going to keep on doing what I am doing, because I've been right so far, right? It's like kind of You know, you look at recency bias is kind of what we call it. It's like, this has been working. So I'm just going to continue doing but you know, just things change over time, your goals change, economic cycles change, tax laws change, you know, there's so many different things that are triggering these variables. that we have, so it's just really important, especially in a topic like equity, it's just really important to get a second-hand opinion because, you know, you did great, but now it's like, what's the next step after that? Is the next step to just continue what you're doing, or is it time for a change of plan? Because the accumulation period is much different than the preservation or the distribution period. There's different strategies that go behind it, and there's different goals that you have attached to those cycles.

48:29 - 49:21 | Christopher Nelson:

That is so important to call out, Max. And this is where I think it is important to have advisors that you can consult in this, because making the money is definitely one skill set. Then there's the preserving it, and then there's managing it so that it can support you. Those are two other skill sets that you need to be able to get educated on, and you need to be able to build a team around to support you in that effort. Let's jump down real quick to number four. I know this is something you're so passionate about, and you have some really good graphics around this. But this is like the no emergency plan. And you did a really nice breakdown a while back ago of, depending on how many incomes in the family, what kind of emergency plan that you need. What do you observe? And then what is your advice to people around that?

49:22 - 52:30 | Max Pashman:

Yeah. And you know, like that chart that I put together was purely my opinion. You know, there's a lot of different takes as far as what you should do for your emergency plan. That being said, there are big variables worth noting. Okay. So the first one is the sources of income, right? If you only have one source of income, and you have a partner, obviously you are basically banking the growth of your future and your lifestyle on that source of income. So there's high risk associated with that. If you have dependents, that's another level of risk because something happens to you, how are they going to be taken care of? Then there's another layer, which is if you have a long-term debt commitment, like a mortgage, for example, what are you doing to ensure that you have enough safety in your plan so that if you run out of funds and you don't have an emergency fund, how do you do it without defaulting on that? Um, and there's just like, there's different layers to that. Like if you're a business owner or even if you're a W2 employee, are you relying on all commission or are you relying like a mostly equity in your plan? You know, there's different tiers to this. Right. And. I stress this a lot on my plan, mostly because despite all the success stories that you see from a lot of people, I work with a lot of people that have gone through really bad times, whether it's they lose someone, they lose a job, or just something unexpected happens. It happens a lot, and it still happens during good times. Like we're in a good cycle right now, and there's still things that happen in between that, you know, forces you to go off course. And that's why I almost like make it a huge priority to emphasize on it because it applies to everyone. And, you know, the intent of the emergency fund is not only to just making sure that you have that safety preserve to, you know, handle these short term comings. But it prevents you from, you know, tapping into your investments that you're trying to position for the long term. So it doesn't interrupt compounding interest. It doesn't force you to take taxes and doesn't force you to take early penalties. But also, and this is what usually happens when you don't have an emergency fund is you take out debt, right? You take out, you know, you spend $10,000 on a credit card and you don't have the funds for it. Guess what? That's $10,000 that's accruing like a 25% APR. on it and that's what we want to avoid right is that a lot of people and you know I see this a lot online is like a lot of people say why don't I just invest in what not you can if you want to but at the end of the day it's there to make sure that everything in your household from your expenses, from your debts, from your investment is all intact. And none of it forces you to go off course, right? Because, you know, you have the safety line for yourself. So I make it a big priority. I think at any stage that you're at, whether it's in the beginning, or even at the end of it, I think having a safety reserve is just vital to keep everything that you're planning for all intact behind the scenes.

52:30 - 53:41 | Christopher Nelson:

It really is. And I think especially as a married couple with kids, when we were when we got to our diversification phase and we were able to, you know, we did pay off our student debts. We just wanted to get those behind us. We started then building up a nice little nest egg of an emergency fund. that was just brought so much relief to just have that there. Because, you know, and it's interesting, I feel like some people get obsessed with, oh, I have to have all my money working and growing all the same rate when it's like, well, no, like this is again, goes back to diversification. If you're taking, you know, 10%, and I'm just using arbitrary figures here. If you take 10% and put it at high risk, and you then have 10% that is at this low risk savings account or CD, those in the model should essentially balance out. But if you keep going all in on this high risk, high reward, it's just like Charlie Munger says, you want an investment portfolio that allows you to sleep at night. That's where the balance and diversification comes in.

53:41 - 54:56 | Max Pashman:

Yeah, it really does. And I mean, like, you know, like a tech employees that are getting like a couple hundred grand or a million dollars in payout is like, how much is your net worth relative to this emergency fund? Probably minimal, you know, it's only like a small percentage of your net worth, you know, it's not going to be the reason why you're not going to be able to retire in a couple more years. you know, so it's, it's just nice to have that little preservation. It's like you said to the peace of mind really allows people to sleep at night and it really helps them make better decisions for themselves. And I say the same thing about the emergency fund. Just like I say with insurance in general is that I have it set up so I never have to use it. I hope I never have to use the emergency fund. I hope I never have to use the insurance, right? But I have it there in case that happens. And that's something I'm willing to set aside to know that if things go off course, it's going to be there when it happens. And remember, it's like, we're not, you can't plan when an emergency is going to happen. You don't know when a car accident is going to happen or something. It's there if something happens tomorrow. So you should allocate that amount, like you're going to tap into it tomorrow. And that's why We make safety a priority in the emergency fund.

54:56 - 55:42 | Christopher Nelson:

Yeah, that's so that's so critical. And then the last one we talked about was just a general lack of financial goals or One of the things that you and I both are aligned on is the road to financial independence, or how do you actually get this equity to then work for you in a distribution phase, in a payout phase, in an income phase, so that you can then make work optional. Do you think that, I mean, on your clients and the people who come in, is it the fact that they want it and they just don't know how to build it? Or is there sometimes even an absence of, or is it just that they're so immediate in their current financial pain, they're just not even thinking about it?

55:42 - 58:02 | Max Pashman:

Yeah, I think it's more direction than anything else when it comes to financial independence. I mean, first of all, it's defining what does that even mean for you, right? You know, like I think people get confused sometimes and they think that like it has to mean just like going off the grid completely. For a lot of people, it could mean still working at your W-2 job still, or even still working in your business if you wanted to, right? Because with financial independence, it varies from person to person. But ultimately, what it all shares is having enough of your assets on the side to sustain the financial lifestyle you desire in making decisions that doesn't completely eradicate your portfolio, right? So it just comes down to like what you are looking for in the end. Are you trying to enjoy it now? Are you trying to pursue something else in between? And I think that this disconnect is why a lot of people reach out is like, listen, I got this wealth or I'm trying to build up to this wealth, but I just want to know, like, how can I pursue the things that I want to do? How can I spend more time with my family? How can I do so without having to worry about like having to you know like or i am not having not to worry but like how do i get more control right with my schedule how can i make decisions while totally you know completely depleting my portfolio and that's what people are looking for and especially when it comes to equity compensation it's just a question of like What kind of payout are you looking for? What kind of financial lifestyle do you desire? And then based off of that, we can orchestrate it and we can break it down into saying, this is how your equity should be reinvested so that you can you know, shape out this lifestyle that you desire. So it's going to vary from person to person. But ultimately, I think that it's important to get a secondhand opinion. Because everyone's lifestyle looks different based on location goals, their family, you have to get yourself the right strategy so that it aligns with you. And basically avoiding, you know, like this, you know, one size fits all solution, which may not be in line with what you're trying to do. So I think that when you break it down, it's it's ultimately like what you do with it and how you carve out that plan.

58:02 - 01:00:18 | Christopher Nelson:

Yes, I think that you nailed it early when you said financial independence, people don't understand what that means. And I think that the fire, financial independence, retire early, I think did some disservice because I think that people today struggle with retirement, meaning that, you know, two things. Number one is they they see people that have retired that are now wandering aimlessly, don't really have a purpose and they're not really happy. And they're like, OK, I don't want that. Then you have people who are just so passionate about their work, and they believe retirement is what the word really means, which is taking a service offline. And they think, okay, well, then I have to, if I retire, then I can't do this anymore. When I am a huge fan of saying, no, let's get rid of the word retirement altogether. And I think of it, I thought of it, You know, I graduated to financial independence in August 26, 2022. It was a graduation, meaning that I moved to a different level, which I found, I built a skill set as a multimodal executive, meaning that I could manage multiple smaller things at the same time, transition that into now a project-based or portfolio-based lifestyle where I'd manage my personal real estate holdings, private equity company, and this. And some of them create income, some of them are more like this, more of a passion project where I'm excited to do it. And I think about my financial independence more as I think of it as buy my, which financial independence make an impact. because I want to be able to use these years and the flexibility to go in and make an impact. And I know that there's a lot of technology employees that are starting to think about it that way, too, because some of them and I know I've talked to engineers, they desire to get to financial independence because they want to go solve some hairy problems. They want to go engineer some stuff that, you know, they can't today because they're working for a meta, a Google, and they're being told what to engineer. Mm hmm.

01:00:18 - 01:01:34 | Max Pashman:

Yeah. Yeah. I mean, in the end, it's just it's just shaping out what you want behind the scenes. And, you know, like you said, it's like there's there's a deeper meaning to it. And the thing about it is like, you know, when we think the word retirement, it already like brings up like a negative connotation. Right. We think like completely quitting, not working anymore. You know, like whatever the stereotype you think is of an old person is probably embedded in there, too. Right. Yeah. And people don't like that idea. And I get it. And I think it's really important that when we start to think about financial independence, retirement, or all these things where there's an end goal to meet this, is that it's more so shaping what you desire. And it's up to you to define what that is. And then having you the blueprint to basically taking you there. And look, your situation is going to be much different than everyone else's based on your goals, your investment style that you want the risk, really everything in between. And that's why it's just vital to just approach it with the mindset that this is really just the lifestyle you want to shape it to be in making sure that you're doing whatever is possible to get yourself there.

01:01:34 - 01:01:55 | Christopher Nelson:

That's so good, Max. I know that we can continue to riff for probably another hour or so. But at some point, we got to put a bow on this thing. So let me jump right into the fire round question and we'll put a bow on this. So what's the advice that you would give your younger self around money?

01:01:56 - 01:03:45 | Max Pashman:

The biggest thing that I would say is keep it simple. I mean, I've been learning from every single great advisor, reading every single book, learning about every single strategy. I've seen all the charts. I think I've seen most of the things. I still have a lot to learn in the end. But you know, in my 10 year career, I've looked at every single strategy, advice, It just boils down to don't overcomplicate these things, especially when it comes to investing. Don't overcomplicate putting a monthly contribution in or investing long term or choosing funds that are very simple to stick with. It turns out that just by having the discipline, to commit to your plan is going to be more impactful than every single complicated strategy. And I used to grow up thinking I could beat the market. I could, you know, like, or I should say I should constantly beat the market over a long period of time, right? Like I thought I could be the next Warren Buffett. It turns out I was just as bad as most people out there. None of us, there's very few people that are even remotely close to the Warren Buffett. So we have to just make sure that we're keeping it really simple with our strategy, our philosophy, not trying to beat the average people, so to speak, because it turns out if you stick to these average strategies, you're actually doing a lot better than most people, as it turns out. So just keep it simple to your plan. Don't overthink it. And really just stick to the strategies that make sense and is really easy to comprehend. That's what I would tell my younger self. Don't try to be the next Warren Buffett or any of these legends out there. Just be the next disciplined investor.

01:03:45 - 01:03:50 | Christopher Nelson:

Great. What is your favorite book or resource on investing?

01:03:51 - 01:04:36 | Max Pashman:

It's psychology of money by far. I think that to this day, Morgan Housel, I read the book twice. If you haven't started listening to his podcast, definitely recommend it if you just want like a 15 minute podcast to listen to. Because, you know, like when I get very much absorbed into the technicals and all this stuff, it's nice to listen to financial info. That's just like you and I talking right now, speaking English. I can understand what you're referring to. And it's nice to, be a little more intentional with the why and our habits, because we can look at all the numbers behind it. But I think that kind of education helps us understand the real meaning between our actions and how that translates into the decisions we make.

01:04:36 - 01:04:42 | Christopher Nelson:

That's so good. What is the worst money or investing advice you've ever received?

01:04:42 - 01:05:48 | Max Pashman:

The worst advice that I have received? I think it's Well, the, you know, I get a little annoyed when I see a lot of, you know, the tactics of if you buy this, it's a write off, right? Because it's my least favorite advice, because I understand what that means. But people that are in the financial world don't, right? Because if you think a write off, the first thing you think of is, I just get money back. you know, like, or it's free, you know, and if you know anything about like, tax 101, you understand that that's not what it means, right? And I hate when that advice is thrown out there, just like this is a write off, this is a write off, this is right. It's like write offs are important. I'm a business owner, I try to lower my tax liability. But I know in the end, I am still spending money, right? So let's not get it twisted to say like, this write off means you're getting these things for free. It's still an expense. It's a discounted expense, but it's still money out of my pocket. So I wish people would be a little more transparent instead of throwing it out there like we see online.

01:05:48 - 01:05:55 | Christopher Nelson:

Right. This is a write-off. That's good. And then the last one is, what would you do if you were financially independent?

01:05:55 - 01:06:28 | Max Pashman:

What would I do? I would still honestly like to still work on the educational piece. I enjoy what I do with social media and education and whatnot. And I would very much still like to work with people in finance. I think that this is a career that I intend on being in for a long time. But I would like to do what I can to make sure that people can understand the world that I know, without having to go through all the hurdles. And I hope that when I'm financially independent, I could focus on that full time.

01:06:28 - 01:06:52 | Christopher Nelson:

Well, thank you so much. And I think that just says a lot about you, Max, because it's obvious that you're passionate about it. It's obvious that you've positioned your business to really be service oriented and really help technology employees and people working for equity. So thank you for what you do from somebody who's leveraged services like yours to get through some pain points. So appreciate it. Where can people find out about you?

01:06:52 - 01:07:15 | Max Pashman:

Yeah. So my number one hub is on LinkedIn. You can find me through there. I'm also on Twitter as well. Those are my two hubs. I will be, you know, opening new avenues for like my social media and other endeavors in the future. But if you want to see where I'm at most of my time, follow me on LinkedIn or just shoot me a connection request. Just let me know you listen to the podcast and I'll accept you. No problem.

01:07:15 - 01:07:16 | Christopher Nelson:

Excellent.

01:07:16 - 01:07:18 | Max Pashman:

I'll make sure to educate everyone where I can.

01:07:18 - 01:07:47 | Christopher Nelson:

And I'll put those links in the show notes so that everyone knows where to contact Max. That'd be great. Well, thanks so much, man. Really appreciate your time. Thank you so much for joining today's episode. We hope that you enjoy that. Our ask is one thing. Please leave us a review. If you like what you hear, please give us a five-star review on Apple, Spotify, or you can go to our webpage. We appreciate you. Thank you so much.