Like many Americans, Bill and Anne thought the only way they'd ever be wealthy would be to win the lottery. While they owned their modest house and Bill had a thriving small business, they didn’t exactly have a jet set lifestyle. Still, every time Anne's employer offered her a bonus, she took it in stock options. For seven years, those options piled up and she held on to them. That turned out to be a smart move because Anne works for Qualcomm, one of the most impressive growth stocks in the country. So, when Qualcomm's stock split four ways and then hit a high of $800 in late December, this couple scored a lottery-like windfall. They bought an upscale house in a fairly affluent section of North County and are furnishing it from scratch. Bill and Anne (they asked us not to use their real names) didn’t even have to cash in all their stocks to buy the home and put away a comfortable nest egg. "It’s been amazing," says Bill. "We were able to buy our new house with cash and every single person we know (at Qualcomm) did the same thing. There are even some people who are doing this with homes in Coronado or Rancho Santa Fe." It’s been such an amazing phenomenon that Money magazine has coined these newly rich folks "Quillionares." As one Qualcomm employee puts it, "I have a lot more money than I ever thought I'd have." It’s a growing trend that isn’t limited to Qualcomm. As more businesses, especially high-tech start-ups, go public or see their shares rise, employees who collected stock options as part of their compensation are cashing in. One example is Copper Mountain Networks, which has seen its investment in DSL technology pay off. That's good news for employees like Curt (not his real name). In the three years he's been with Copper Mountain, he's received a signing and performance bonus in stock options. Since then, the stock has split and its shares have risen from $19 to $140. "I never dreamed it would be the way it’s been," says Curt. "It’s given me the option of thinking about a house in Del Mar with a view of the ocean, a house I could never have thought about before." Another of San Diego’s brightest success stories is InterVu, a company that specializes in transmitting audio and video over the Internet. The company went public in November 1997 and employees with stock options are now being amply rewarded. "I'd say 200 out of our 330 employees are now millionaires," says Harry Gruber, chairman and CEO of InterVu. "Some of those have been here less than a year." What’s remarkable is that these newly rich aren’t geniuses who came up with a new widget or business plan — these are just employees who were wise enough to take stock options and hold onto them until they became hot. With all this new-found wealth circulating, it’s no wonder that car dealers and real estate agents around the county are reporting a surge in spending. Flush with money, many employees are free to live out their financial fantasies with sleek new cars or huge houses. Still, many pitfalls face these newly rich, who may be financial neophytes. In part that’s because their employers, often because of legal ramifications, offer limited or no financial advice to guide employees through this new stage in their lives. "Qualcomm has a stock administration department that assists employees with stock option and Employee Stock Purchase Plan transactions and an investor relations department," reports Christine Trimble, senior manager, public relations. "However we do not offer in-house financial planning or brokerage services." Yet these same individuals, financial and tax planners agree, are in desperate need of counseling. "These people are pathetic souls who need advice," says Peg Eddy, president of Creative Capital Management Inc. "This new found freedom can be very stressful and comes with a lot of burdens and choices, which can be scary to some people." For that kind of expert guidance, a financial planner is an excellent place to start. Going it alone can be a critical misstep. "There are three stages of financial wealth," says Eric Gardiner, a financial adviser with Northwestern Mutual Life. "There's the acquiring of financial wealth, the preservation of financial wealth and then the succession of financial wealth. A good financial planner will help you in those three areas by guiding you and helping you reach your goals one step at a time." The first difficult choice is deciding when to sell, as stocks can easily continue to climb or plummet. Until a stock is cashed out, it’s just a piece of paper with a hypothetical value. Eddy recommends that employees leave some money in stocks and slowly divest of their holdings. "I don’t believe in backing up the truck and putting it all in at once," she says. "It’s better to sell batches off at a time because you can never know when it’s going to be the apex of the market." Once the cash is in hand, that’s when it’s time to sit down and really put together a financial plan. Eddy suggests thinking about what she calls the "money psyche" — how a person views money. Then she recommends putting aside some fun money for a new sports car or a new home. "It’s time to release the stress and celebrate the new situation — they've worked for it," she says. "This could be their last day on earth so they should enjoy it." Obviously, in San Diego, real estate can be a wise as well as enjoyable investment. "The purchase of a home could be a prudent decision," says Trent J. Collins, a financial advisor for Prudential Securities. "A home that serves as your residence can provide financial options not associated with renting, in addition to tax advantages." But once immediate dreams are fulfilled, it’s time to take a look at the big picture. Most financial planners suggest a more diversified portfolio. "Asset allocation provides diversification, which is a method of spreading risk over a variety of asset classes, such as stocks, bonds and cash," Collins adds. "Diversification is important for investors." There are also plans that create a financial hedge against difficult times, such as putting aside a nest egg in case of being laid off or retirement. Some people set up trust funds for their children or start a foundation to improve the world. Estate planning is also critical. "It’s good to have things squared away," says Eddy. "We’re all mortally challenged." With more assets, greater insurance can help protect those funds as well. "One mistake could be inadequate insurance; an estate, even a very large one, can be devastated by disability, catastrophic illness, lawsuits and estate taxes," says Collins. In making plans, it’s important to avoid pitfalls that could either sabotage these plans or sink the funds entirely. Eddy warns the newly rich that friends and family will often come out of the woodwork looking for financial help. However, most financial advisers agree that taxes are most likely to trip up the freshly wealthy. For instance, many employees aren’t aware that when they cash out stocks, they are liable for 20 percent federal capital gains taxes and 9.3 percent state taxes. If they don’t hold the stocks for a year after they're vested, federal capital gains taxes spike to 39.6 percent. "So almost 50 percent gets taken away for taxes," points out Jim West, managing partner at West & Associates. "Another huge tax is property tax. It’s 1 percent of your house and if you've bought a million dollar home, that’s $10,000 a year. Maybe their lifestyle doesn’t support that. Add to that insurance of $2,000 or more a year and they may not have enough income to support the house." Perhaps that’s why, even with the flush of spending going on, this new breed of millionaires isn’t quite ready to give up their jobs. As Gruber points out "A million dollars isn’t what it once was and many people still believe they have to work." Add to that employees who are devoted to their companies as well as their professions — they like their jobs. "I’m not planning to retire because I like what I do," says Curt of Copper Mountain."I’m only one-third vested. Maybe they design it that way to keep people who know the product and are committed to a company’s success." For Bill and Anne, retirement also remains a distant goal. But there's no denying this new-found wealth has radically changed their lives. "The most significant impact is that it provides a more secure future for my children than we had as kids," says Bill. "Besides that, in the next 60 to 90 days, I have numerous housewarmings to go to."

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