VEIP Investment Review

Accenture’s sideways stock price since late-2021 has made many MDs question the value of the VEIP investment. It has been especially upsetting for those in the “415” club whose MD grants vested on Jan 1, 2022 – right near the all-time high for Accenture’s stock price.

Let’s take a look at actual returns across various strategies to assess the past value of the VEIP. Keep in mind, this is backward looking and not intended to be investment advice — it is for educational purposes only.

Let’s start by looking at the source of the problem: Accenture’s paltry stock returns over the last three years, especially as compared to the QQQ. To be more fair, we’ll also look at VTI (Vanguard Total Market), keeping in mind both are heavily weighted in large cap tech, which have enjoyed the majority of returns the last two years.

Poor ACN sits at the bottom of the chart with a 14.63% return since January 2021. If we look from Jan 1, 2022, ACN has a -14.32% return, but QQQ also drops from a 50% return to a 26.5% return.

Let’s back test five different strategies to evaluate total returns. We’ll analyze the 2020, 2021 and 2022 VEIP programs.

• Strategy 1: Participate in the VEIP, hold shares and RSU grant through today
• Strategy 2: Participate in the VEIP, sell all VEIP shares when allowed (Jan 6th), purchase QQQ with proceeds and add ACN RSU two years later
• Strategy 3: Participate in the VEIP, sell all VEIP shares when allowed (Jan 6th), purchase VTI with proceeds and add ACN RSU two years later
• Strategy 4: Don’t participate in the VEIP, purchase QQQ monthly instead
• Strategy 5: Don’t participate in the VEIP, purchase VTI monthly instead

Assumptions

• Salary $330k, bonus $70k
• Fully participate in the VEIP (30%) or $120k invested each program year
• RSU vest taxed at 30%, with shares withheld for taxes after vest (reflected in calculation)
• All QQQ and VTI purchases coincide with VEIP purchase dates (5th of each month or previous business day, average daily price)
• RSU income tax is included by lowering RSU share count, but capital gains/losses from selling VEIP shares or QQQ/VTI profits aren’t included
• The 2022 VEIP RSU doesn’t vest until Jan 5, 2025, but I’ve calculated the value and return using today’s ACN stock price

While I tried to include most of the factors, the biggest factor not included are capital gains from sales of ACN or the eventual sale of QQQ/VTI. It just gets a little too intense to calculate these based on the monthly purchases.

For those with short attention spans, let’s start with the most consumable data: Total returns by strategy.

As many have observed, the QQQ growth of the last couple of years have left ACN returns far behind. If monthly purchases from the 2022 VEIP were instead used to buy QQQ, total returns are 155% versus 38% for ACN only with the VEIP RSU (Strategy 1), though only 34% versus 28% when calculated for the “2021” VEIP year.

Discontinuing the VEIP and investing in QQQ wasn’t always the best strategy though, as for the 2020 VEIP year, you would have the best returns with strategy two (participating in the VEIP and then selling/reinvesting).

We also have to remember that we’re assuming all 2021 VEIP shares were sold on Jan 6, 2022 when ACN was near the multi-year low at $264.77. It doesn’t account for strategic selling based on market conditions.

The most consistent returns came from fully participating in the VEIP, selling at the end of the program year and purchasing QQQ or VTI, and then receiving the VEIP RSU two years later (Strategy 2 and 3). The QQQ total returns today are 97% when adding the VEIP RSU with the 2020 VEIP, 89% for 2021, and 88% for 2022 VEIP year. The VTI returns are 81% / 74% / 62%.

Here’s the full breakdown of returns by strategy by VEIP year, included the annualized return:

The easiest way to decide what you should have done in the past is by looking at historical returns. However, this obviously isn’t the best way to decide a future investment strategy.

Going back to the reason of maxing the VEIP, even if ACN is sideways for two years, you receive a 22% annualized return before RSU income tax, and a 16% annualized return after RSU income tax (assuming 30% taxes).

Let’s zoom out to look at the ten-year returns of the same three investments:

While the QQQ’s returns are once again at the top, if we return back to February 2024 before ACN’s last drop, Accenture actually had a higher return than QQQ in the ten-year view.

Investing is dfficult because it’s forward-looking and dependent on an incredible number of variables that we can’t even come close to identifying. Will QQQ continue to outpace ACN the way it has the last three years, or will ACN return to growth and overtake QQQ?

If the latter is the case, not only will you receive the higher returns from ACN, but you’ll also add the 16% (after-tax) / 22% annualized return from the VEIP bonus. QQQ returns would need to outpace ACN returns by ~16% per year to breakeven… which is a lot.

If this assessment helps reinforce any strategy, it should be the value of diversifying ACN if you’re participating in the VEIP. If you’ve fully held ACN VEIP and RSU shares through this last couple of years without selling and reinvesting, you’ve severely underperformed the market. However, you also have to consider tax strategies to minimize short-term capital gains and remember the wash sales rule.

This is complicated stuff, so don’t feel bad if the complexity of Accenture comp still seems foggy. Working through these strategies can be much easier when leveraging the expertise of professionals in investment management and accounting, but they need to understand the intricacies of the VEIP and Accenture MD compensation.

While this is exactly what I do at Adventure Wealth, I’m not currently taking new clients. However, I do have a wait list for interested potential clients, and even if I can’t help you right now, I would be happy to have a conversation if you need help finding a professional. Please feel free to reach out to me by replying to this email.