Clients whose employers offer equity in the company as part of a compensation package may experience income volatility, unlike with predictable all-cash salaries. Strategies to manage such volatility include creating a portfolio diversification plan and helping the client overcome any emotional attachment to the stock they hold. When employees have company equity as part of their compensation, they may receive restricted stock units (RSUs) or stock options, in addition to their cash salary. An advisor can help the client understand the implications of drawing from each type of compensation, said Lukas Fleck, an associate portfolio manager with PWL Capital in Ottawa. If the compensation package doesn’t provide enough cash to cover expenses, RSUs are often the first source to help fill the gap, as they can be sold for cash as soon as they vest without incurring additional taxes, Fleck said. Monthly and quarterly vesting periods are common, but it varies from company to company. However, RSUs come with the risk of stock price volatility, as they vest at fair market value. For example, if an employee is granted RSUs that are worth $10 a share now, they would end up with less if the price falls to $8 when they vest in the future. Stock options come with the highest risk of volatility. During an exercise period, an employee has the right to buy company stock at a predetermined price, but the stock would be worthless if the fair market value were to fall below the exercise price. Although income planning is simpler when a client’s compensation package has a larger cash portion, company equity has advantages, said Danny Popescu, founder and CEO of Harbourfront Wealth Management in Vancouver. For example, RSUs have potential to increase in value by the time they vest, and stock options could receive preferential tax treatment.