The VEIP: A Historical Review

VEIP enrollment is here again, so it’s time for Accenture Managing Directors to decide how much of their cash flow they want to kill!

• Should I have the paycheck of a Managing Director?
• Should I have the paycheck of a Manager?
• Should I have the paycheck of a Consultant?

The VEIP cash flow crunch is very real, and if this is your first year to sign up, you need to ensure you’re prepared for the cash flow impacts.

I’ve written about the value of the VEIP in the past, but let’s see how the VEIP has performed historically, which is especially important in a year when ACN was down 40% at one point.

One way to review the VEIP opportunity is to see how the forced monthly purchases have worked out historically. The good thing about the VEIP is you’re forced to purchase when the market is down, but the bad thing about the VEIP is you’re forced to purchase when the price is up!

Let’s look at the average price for the last ten decades each year. The numbers below reflect the average of each twelve-month purchase price.

Accenture averaged an eye-popping 17% return in the previous ten years through 2021, so it shouldn’t be surprising the average VEIP purchase price was higher each year… until this year.

The average price in 2021 was $314.79 per share and peaked at a $400.53 purchase price on January 5, 2022. The market has painfully dropped since then, and each 2022 VEIP purchase has looked better and better.

So far this year, the average price is $301/share, with early purchases of $345 per share and last month’s purchase at $260 per share! I know it’s painful, but this is a great opportunity for the future.

2021 was an Anomaly

For many reasons, 2021 was an anomaly, but it especially was with Accenture’s stock price. Let’s review the average VEIP price per year compared to the previous year.

Well, look at that. The average price increased 16.6% over nine years but then jumped to 46% in 2021! Even with the pandemic crash in 2020, the VEIP average increase held steady at 16.9% over 2019.

However, the price blasted off in 2021, distorting all historical averages. 2022 will be the first year in a long time the average VEIP price decreased from the previous year.

While the increase in 2021 looked good for your net worth, it means you bought way fewer Accenture shares with the VEIP. For example, in 2020, $100k would have purchased 463 shares, but the same $100k would’ve only purchased 317 shares at the average price of 2021.

What’s worse, the VEIP match is 50% of the number of shares purchased, so you would have received 73 fewer shares in 2021, which would be worth $21k today.

That’s why you should be excited the price is lower for this year’s VEIP.

The consequences

2022 has been a challenging year if you’re in the position of many Managing Directors who need to sell the VEIP annually to cover the negative cash flow. You’ve lost money due to the VEIP, and it’s caused a tax headache.

Due to the monthly VEIP purchases, the losses on the sale of shares are “wash sales.” We’ve covered this before, but wash sales can’t be used to offset capital gains or claimed for $3k in losses against your income like regular sales.

Instead, the rule on wash sales is you can add the wash sale loss to the basis of the stock you purchased that caused the wash. If you think I threw a bunch of words in a bowl and picked them out to make that last sentence, you’re not alone.

The wash sale rules are very complicated, but it’s something you’ll want to pay attention to this year. Your year-end UBS tax statement will contain this information, so you’ll want to work with your CPA or advisor to ensure these disallowed losses are carried forward so you can eventually claim the loss.

In the end, the VEIP is a gamble because it’s tied exclusively to Accenture’s stock price. However, if you can make the cash flow work, it usually pays off in the long run, as evidenced by the average 17% growth before 2021.

What’s your VEIP strategy?

You need to carefully manage this complexity to ensure you’re maximizing your Managing Director compensation.

The VEIP is a very valuable tool for building wealth quickly. However, it can also go dangerously wrong if you’re not paying attention to the concentration risks of holding too much of one stock or managing the tax impacts.

Managing this risk through planned RSU vesting and VEIP sales is just one of the ways I help my MD clients optimize their wealth creation and find peace of mind.