For many ultra-high-net-worth families, a concentrated stock position isn't a mistake to be corrected — it's the source of the wealth itself. A founder's equity, an executive's accumulated shares, a decades-held winner: these positions created the fortune. But the same concentration that built the wealth is now, often, the single largest risk to preserving it. The goal isn't reflexive diversification. It's a deliberate plan — matched to how much risk the family is actually comfortable carrying, how much they'll need to draw on, and what acting will cost in taxes.
Why a concentrated position deserves a plan, not a reflex
The instinct at many firms is to recommend selling down immediately — diversification as a default. But a position representing both enormous financial value and, often, deep personal conviction deserves more than a reflex. The right answer depends entirely on the specific family, and getting there starts with understanding three things before any product or strategy enters the conversation.
The three questions that come first
How does the family actually perceive the risk? Concentration risk on a spreadsheet is one thing; how a client feels about the company they built or the stock that made them is another. Some hold deep conviction and want exposure retained; others simply haven't registered how much risk a single position carries. The strategy has to start from the client's real perception, not a textbook's.
How much of the position needs to fund future spending? A position that must be partially liquidated to fund a lifestyle, a purchase, or a commitment is a different problem than one that can be held indefinitely. We map the family's projected cash needs against the position before deciding what — and how much — to unwind.
What does the complete tax picture look like? Unwinding a low-basis position can trigger substantial capital gains, and the timing of those gains interacts with everything else in the family's tax life. We build a comprehensive, multi-year projection so decisions are made with the full consequence in view, not one transaction at a time.
We load all of this — risk tolerance, cash-flow needs, and the full tax projection — into our planning platform, MoneyGuide Wealth Studios, to model strategies and outcomes side by side: staggered sales, gifting of appreciated shares, and more. Seeing the projected results against one another, before committing to anything, is what turns a concentrated position from a source of anxiety into a managed plan.
The tools — and the honest tradeoffs
Staggered sales and gifting appreciated stock
The tax-aware core of most plans is a deliberate, multi-year sell-down that spreads capital gains across tax years, paired with gifting highly appreciated shares to a donor-advised fund or other charitable and estate vehicles — especially in high-income years, where the deduction is most valuable and the embedded gain leaves the estate entirely. Gifting shares rather than selling and donating the proceeds can avoid the capital-gains tax on the gift altogether — on a large, low-basis position, a meaningful number.
Exchange funds and direct indexing
Both have a place, and we use them — but candidly. Exchange funds let an investor swap a concentrated position into a diversified pool without an immediate taxable sale; direct indexing can rebuild diversification around a held position while harvesting losses. The catch is cost: exchange funds in particular carry meaningful sponsor and administrative fees and often lock capital up for years. They're frequently a temporary solution, not a permanent one, and the fees must be weighed honestly against the tax deferral they provide.
Options structures
When protecting against downside is the primary concern — the family wants to keep the position but can't absorb a large decline — an options structure such as a protective collar is often the better tool. Two things determine whether it actually serves the client: it must be carefully structured to match the family's real objectives and expectations, and it must be competitively priced. This is where many large firms fall short. Their in-house options desks are significant revenue centers, and a structure priced off a single captive desk rarely lands in the client's favor. We have no such desk and no such incentive — we put these structures out to competitive bid. Because these are bilaterally negotiated, customized contracts, some dealer edge is always embedded; competition doesn't make it disappear, but it compresses it substantially — often by half or more — which on a structure this size is real money kept in the client's pocket.
Why independence changes the math
Every one of these decisions — which tool, how fast, at what cost — is vulnerable to conflict at a firm that profits from the very product it recommends. As an independent, fee-only fiduciary, we're paid only by the client. We have no exchange-fund shelf to fill, no options desk to feed, and no commission riding on the answer. On a concentrated position worth millions, the difference between a competitively bid structure and a captive one is real money.
What a sound process looks like
In practice: understand the family's risk, needs, and tax picture; model the alternatives side by side; match the tool to the actual objective rather than the firm's product menu; and execute with pricing tested in the open market. That's the discipline behind our concentrated stock case study, where we diversified a technology executive's position over several years while controlling the tax cost — and it's the same approach whether the concentration came from executive equity, a business sale, or a long-held investment.
A concentrated position is often the best thing that ever happened to a family's balance sheet — and, left unmanaged, one of the biggest risks to it. The work is holding both truths at once: building a plan that respects the value the position created while protecting the family from depending on it. If a single holding represents a large share of your wealth, that plan is worth building deliberately. Begin a confidential conversation →
Vaquero Private Wealth is an independent, fee-only fiduciary serving ultra-high-net-worth families in Dallas. This material is for educational purposes and reflects the authors' current opinions, which are subject to change. It is not tax or legal advice; options and other hedging strategies involve risk and are not suitable for all investors; we coordinate with your independent tax and legal professionals. Examples are illustrative and not a projection of any specific result.