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Equity Compensation Participants Receptive to Financial Wellness Programs

Employees who participate in equity compensation plans see the long-term value of the benefit but many don’t fully understand how they work and are afraid of making a mistake when exercising employee stock options or selling shares, a new survey reveals.

More than one-third of participants (36%) say equity compensation is the reason or one of the main reasons they took their job, yet just 24% have exercised employee stock options or sold shares that are part of their equity compensation, according to Schwab Stock Plan Services’ nationwide survey of 1,000 equity compensation plan participants.

In fact, only half of respondents are confident in their ability to make the right decisions about their plan on their own, according to the survey. Among those who have never exercised or sold their equity compensation, 34% are worried about selling under the wrong market conditions, and 34% expressed concern over the potential tax implications from making a wrong decision.

Advisors and Wellness

Apparently because of this lack of confidence, many equity compensation participants appear to be open to receiving assistance. A strong majority of all respondents (80%) say they would be much more confident with the help of a financial advisor. As for their preferred areas of advice, respondents cited assistance with the tax implications of their decisions (50%), using the benefit to help prepare for retirement (44%) and knowing when to exercise or sell their equity awards (35%).

In addition, survey participants also expressed interest in taking advantage of a financial wellness program if it were offered by their employer. Two-thirds of respondents who have access to this benefit take advantage of it, and most participants (96%) find it helpful when making equity compensation decisions, according to the findings.

But Schwab notes that there is a wide access gap when it comes to wellness. Only 43% of respondents’ employers currently offer a workplace financial wellness plan.

When asked about components of a financial wellness program they would value the most, respondents say they want a “holistic plan that goes beyond just equity compensation advice.” The findings show that they would prefer resources to help with planning for retirement (65%), a free or discounted consultation with a financial advisor (51%), and help with personal wealth building (45%) and setting savings goals (44%).

Wealth Building and Loyalty

Meanwhile, more than three-quarters (76%) of respondents consider equity compensation part of their long-term financial plan, and most say their equity compensation helps them feel “less stressed” about their finances (76%) and “more prepared for retirement” (63%).

In this case, most Boomers (84%) and Gen Xers (81%) consider equity compensation to be part of their long-term plan, while Millennials (31%) were more likely to use their equity compensation in the short term.

The top reasons employees say equity compensation is an “essential or very important benefit” are:

  • Helps them to build their wealth significantly (55%)

  • Participate in the growth of the company (52%)

  • Provides greater control over their finances (44%)

Schwab emphasizes that equity compensation plans also play a role in employee loyalty. The findings show that 11% of respondents say they would not consider leaving for another job at all, and 28% say they would not consider joining a new company until after the next vesting event at their current job.

“Tens of millions of Americans participate in equity compensation programs and most recognize their importance, but many are unsure of how to maximize their value,” said Marc McDonough, senior vice president, Schwab Investor Services. “When managed correctly, equity compensation can play a meaningful role in building wealth. The survey made it clear that employees would benefit from more help in understanding the role this benefit can play in their long-term financial plan.”

Conducted by Koski Research for Schwab Stock Plan Services, the survey results are based on 1,000 interviews of equity compensation participants who worked for companies that offer equity compensation plans, are currently participating in an equity compensation plan and were 25-70 years old. Respondents participated in the study Sept. 18-29, 2017.