By Mike Gibbons, RICP®
Some pharmaceutical executives spend all or most of their careers with one employer. But for others, changing pharmaceutical companies is a necessary step for career growth.
Moving from one company to another can be daunting, and if you make the switch without proper planning, it could have long-lasting negative impacts. While I recommend that each executive seek personalized financial guidance, here are some general financial steps to consider before changing companies.
Take a Close Look at Your Equity Compensation
Even if your new employer offers higher overall compensation, it’s important to minimize any losses in equity compensation when you switch companies. Review the following to see what you may forfeit if you switch employers now:
Any unvested restricted stock units (RSUs)
Any unvested performance shares
Your existing incentive stock options (ISOs) and non-qualified stock options (NSOs)
You may still have access to some kinds of equity compensation for a time after you leave. For instance, many ISOs and NSOs have a post-termination exercise period. This is a period of time after you leave where you’re still free to exercise your remaining options.
Keep in mind that many executive contracts have specific exit clauses dealing with existing equity compensation. You should always review your contract carefully before finalizing your exit.
Understand Benefit Rollovers
To mitigate the risk of owing significant early withdrawal penalties, it’s important to roll over existing benefits when you can. For example, if you have a 401(k) with your previous employer, that account can ordinarily be rolled into a new employer’s plan or an IRA. This type of rollover typically doesn’t come with taxes or penalties.
However, if you have a non-qualified deferred compensation (NQDC) plan or a supplemental executive retirement plan (SERP) with your previous employer, these plans can’t be easily rolled over. Along with other types of non-qualified accounts, NQDCs and SERPs are governed by strict IRS rules.
Instead of carrying your NQDC or SERP with you to your next employer, you should receive the same future payments you locked in when you created your plan. In many cases, you can’t change your future payment dates right before you leave your employer.
Negotiate With Your New Employer
Pharmaceutical companies are willing to pay a premium for talent, especially when they’re recruiting executives. If you’ll be leaving unvested equity or other compensation on the table when you leave your current employer, you might ask your new employer for cash or equity sign-on bonuses to offset that loss.
Assess Concentration Risk
Because equity compensation is a major part of many pharma executives’ compensation packages, it’s easy for your portfolio to become over-concentrated with employer stock.
Having a substantial portion of your net worth tied to just one company is incredibly risky. If you don’t already have a diversification plan in place, your advisor can help you rebalance your portfolio before moving on to the next stage of your career.
Get Dependable Guidance When Changing Pharmaceutical Companies
For a pharmaceutical executive, switching companies sometimes becomes an essential part of career growth. But if the transition isn’t executed carefully, it could do long-term financial damage.
Gibbons Financial Group focuses on the needs of executives in the pharmaceutical industry, and we’re ready to guide you through the nuances of changing employers at any stage of your career.
Think we may be the right firm for you? Get in touch online, call 224-419-5550, or email me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation. And be sure to join our free webinar, Retiring Early From Pharma.
About Mike
Michael J. Gibbons, RICP®, is the founder and president of Gibbons Financial Group, leveraging over 25 years of experience to provide custom-tailored wealth management for pharmaceutical and healthcare professionals. He specializes in asset management, Social Security, and pension planning, helping pre-retirees and retirees navigate early retirement with confidence. A Lake Forest College alumnus and multi-year Five Star Wealth Manager*, Mike is an active community volunteer and golfer who enjoys spending time with his wife and children.
*Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2016/2018 Five Star Wealth Managers.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.