Close Close

Portfolio > Alternative Investments > Private Equity

Schwab: Employees With Company Stock Plans Welcome More Financial Advice

Your article was successfully shared with the contacts you provided.

COVID-19’s long arm has stretched into equity compensation plan participants’ decision making, Schwab Stock Plan Services reported Tuesday.

A survey found that 67% of those who recently exercised or sold equity compensation were influenced by the coronavirus-related market volatility and economic downturn.

Thirty-nine percent of respondents said they were more likely to need financial advice because of the pandemic.

Related: What the Fastest Growing RIA Firms Do Differently

“Without question, 2020 has introduced an unprecedented level of uncertainty, forcing participant investors to reprioritize their long- and short-term financial needs,” Amy Reback, vice president of Schwab Stock Plan Services, said in a statement.

“These are difficult, confusing decisions within what are arguably the most challenging circumstances in our living history. What has remained the same is the desire to make the best financial decisions possible, and the interest in having access to the tools, advice and guidance needed to make those decisions.”

How Advice Helps

While 51% of participants said they planned to use their equity compensation for retirement, the survey detected a slight uptick overall this year in those turning to their equity compensation to help meet immediate needs — paying off debt (9% versus 5% in 2019); and short-term emergencies (7% versus 5% in 2019).

According to the survey, millennials have experienced a more pronounced effect compared with other generations, and may need more help developing a financial plan.

Ninety-five percent of millennials who recently exercised or sold equity compensation reported that the pandemic had influenced their decision, and 27% said this was because they were under financial stress.

Although more than three-quarters of survey participants reported satisfaction with their employers’ communications about their equity compensation plans during the pandemic, 85% said they would like their employer to provide more education.

A majority said they were uncertain how specific equity compensation types fit into their portfolio, but when they had the help of an advisor, their confidence about making the right decisions increased from 73% to 83%, Schwab reported.

Against the backdrop of the pandemic, these were areas where employees said they currently needed help and advice:

  • Retirement planning – 32%
  • Investing – 28%
  • Taxes – 25%
  • Developing a financial plan – 22%
  • Balancing equity compensation with other investments – 22%

Wealth Builder

“Employees, especially millennials, are demanding equity compensation as a highly desirable component of workplace benefits packages,” Reback said. “Offering equity compensation automatically gives employees a stake in the future success of the company and helps employers to attract and retain the best talent.”

Related: How to Hire for Skills, Not Experience

Equity compensation can also be a significant long-term wealth builder for individuals, and can help meet critical financial goals, such as retirement, according to Schwab.

Forty-three percent of respondents reported that they had exercised or sold at least some of their equity compensation during their career, with 30% having done so as part of their long-term financial plans.

At present, equity compensation makes up 32% of employees’ net worth on average; for millennials, it makes up 43%.

On average, employees are 58% vested in their equity compensation, down 7% from 2019. The average vested value of participants’ equity compensation is $75,483, down from $97,711, and the average total value of their equity compensation is $130,018, down from $149,835 in 2019.

Year-over-year declines in value are potentially the result of share price valuations for individual organizations, and of participants exercising or selling their equity compensation, Schwab said.

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.