You have a concentrated position that's appreciated significantly. You're aware the concentration is a risk, and you're considering how to address it while managing the tax impact thoughtfully. You want to be smart about it. You don't want to overpay in taxes, but you also don't want to get tangled up in something so complex that you end up worse off. So you're looking for someone who can actually walk you through your options and help you think it through.
This is one of the more common situations we see. Someone has built real wealth inside a single stock, they know the concentration is a risk worth addressing, and they've usually read about a few of the strategies out there: long-short SMAs, exchange funds, systematic selling. What they don't have is a way to know which of those actually fits their situation, or whether they even need something that elaborate. Most of the time, they've been meaning to deal with it for a while, and the tax bill is what keeps freezing them in place.
The right place to start isn't with a strategy at all. It's with understanding your specific situation (your holdings, your tax picture, your goals), because that's what actually determines which approach fits. The strategy comes later, once we know what we're working with.
The first things we look at
When you sit down with us, we're asking four key questions:
First: what do you actually own, and what's the tax profile? Here's a concept that matters: every time you exercised options, received an RSU vest, or bought shares on the open market, those shares became a separate purchase lot. Each lot has its own cost basis, holding period, and embedded gain or loss. Most people don't think about this. They see one big position and one big number. But the IRS sees dozens of mini-positions, each with its own tax consequences.
We pull your lot analysis to map all of these out. Your cost basis, your holding periods, your unrealized gains lot by lot. Why? Because once you see the position broken into its actual components, the choices start to reveal themselves. The lots sitting at a loss or a small gain can often be sold first, at little or no tax cost. The heavily appreciated lots are the ones that actually call for a plan. You can't make that distinction, let alone act on it, until you've looked at each lot on its own, and it's the difference between selling blindly and selling with intent.
That lot schedule is a tax document, but what it produces is an investment decision: which shares to move now and which ones to build a plan around. It's the first place where the tax work and the investment work have to sit at the same table, which is exactly why we run both under one roof.
Second: what does your income look like, now and in the years ahead? If you're still at the company and receiving equity, we need to understand that inflow, because you might be adding to the problem even while you're trying to solve it. If you're approaching retirement or a major transition, that changes the planning horizon and the urgency. If your income varies year to year, that shapes when and how much you can realize in gains and help manage your tax bracket exposure. Some years you can absorb more gain realization. Other years you can't. Understanding the pattern tells us when it actually makes sense to sell. This is a tax question that ends up driving an investment decision. When you sell is shaped as much by your bracket in a given year as by anything happening in the market, and you only see that clearly if the person reading your return is the same person building your plan.
Third: where are the proceeds actually going? Are you reinvesting all of it for long-term growth, or do you need some of the capital for a specific purpose: a home, a business, income, a gift to family? The answer matters, because the way we execute the sale should line up with what the money is for. If you have a specific need in two or three years, you're selling with a deadline. You want the capital realized, taxed, and ready to deploy on schedule. If you're building a diversified portfolio for the long haul, you've got flexibility on timing and pace. You might stagger the sales across multiple years to smooth the tax impact, or you might layer proceeds into a long-short SMA where tax harvesting can provide an opportunity to offset gains over time. The reinvestment destination also shifts the strategy. Near-term capital stays liquid and safe, while long-term capital can live in a more complex, tax-efficient structure.
Fourth: what's your appetite for complexity versus your appetite for tax cost? Some people say, "I just want this done. I'll accept the tax hit." They'd rather have a clean, straightforward execution and know exactly what they owe. Others say, "I want to minimize the tax impact, and I'm willing to manage something more involved to get there." They're comfortable with ongoing monitoring, loss harvesting strategies, and a multi-year timeline if it saves them meaningfully on taxes. Those are two fundamentally different conversations, and they lead to very different plans. Neither is wrong. It comes down to what fits your priorities and your bandwidth.
What that actually looks like in practice
Let me walk through a hypothetical. It isn't a real client, but in our experience, the numbers are representative of situations we see regularly. You have a $5 million position with a $500,000 cost basis. Your unrealized gain is $4.5 million. At 2026 tax rates (federal long-term capital gains, net investment income tax, and California state tax combined), realizing that entire gain in one year could result in approximately $1.67 million in tax liability.
When we run the lot analysis in this scenario, a chunk of the position can be sold immediately without much tax pain. Some shares were acquired at a much higher basis, or held for less than a year, so the tax cost on those is modest. You sell that tranche first, generate proceeds with little tax friction, and you've already made progress.
Now you have $4.2 million left: the core of the position with significant embedded gains. This is where strategy actually matters.
At this point, the conversation branches:
Path One: You want simplicity. You accept that you'll eventually pay tax on most of these remaining shares. Instead of realizing it all at once, you build a multi-year plan: sell some this year, more next year, the rest the year after. This spreads the tax cost across multiple years and lets you coordinate with your income picture. The appeal is straightforward: you diversify fully within a defined window, the execution is clean, and you always know what's coming. You're trading some tax optimization for speed and simplicity.
Path Two: You want to minimize the tax impact. You're comfortable with a more involved approach that unfolds over time. You sell a tranche of the concentrated position and immediately redeploy those proceeds into a long-short SMA designed to generate tax losses. In that first year, you realize gains on the sale, but the SMA is also producing losses. Those losses offset some (hopefully a meaningful amount) of the gains you just created. Then you move forward with choices. You can stay tax-neutral: sell additional tranches only when you have SMA losses to offset them. Slower diversification, but you're not paying tax beyond what the losses absorb. Or you can be more aggressive: sell more tranches even without losses waiting, knowing future SMA losses may eventually offset some of that tax cost. Faster diversification, but you accept some near-term tax liability. Either way, the SMA may generate losses that give you optionality you wouldn't have just selling the stock cold. The tradeoff is engagement: you're managing this over multiple years. But for people serious about minimizing tax on diversification, that's the point.
Both paths move you toward diversification. Both have you managing the tax thoughtfully. The difference comes down to what you're optimizing for: Path One is faster and simpler but leaves some tax savings on the table, while Path Two lowers the tax bill but asks for more time and more engagement to get there.
What this actually requires
You just walked through how this gets analyzed: the lot-by-lot picture, your income and timeline, where the proceeds are going, and your appetite for complexity versus tax savings. You saw two real paths, each with different tradeoffs, each requiring different execution.
What you might notice is that none of those decisions are purely tax decisions, and none are purely investment decisions. They're intertwined. Your basis determines what tranches you can sell without friction. Your income picture shapes when you can realize gains. Your reinvestment goals dictate whether a long-short SMA makes sense, and that choice feeds back into the tax outcome. Your complexity tolerance is as much an investment question as it is a tax question.
This is why it matters to work with someone who understands both sides. Not because you need two specialists in separate offices trading emails after the fact, but because the investment advisor and the CPA should be working from the same set of facts, in the same conversation, as the plan is being built. The tax strategy and the investment strategy aren't separate conversations. They're one conversation.
If you have a concentrated position and you're ready to understand your options, that's where a real conversation starts.