What You Need to Know
- Many large companies offer equity compensation to their top employees (your potential clients).
- Including that compensation in their financial planning leads to more proactive use of it, according to Fidelity
- Employees are likely to add the equity to their plans when the award vests.
What are the effects of including company stock in an employee’s financial planning activities, or not doing so?
Fidelity Investments designed research to specifically measure the effect. In mid-2020, the firm surveyed 440 employees at publicly traded companies who have received equity awards within the last two years.
The findings, released Thursday, showed that employees whose financial plans includes equity compensation were twice as likely to take proactive steps to manage their stock awards. Of those who include company stock in their overall financial planning, 72% accepted their awards, 52% exercised options and 57% sold shares.
Among employees who do not consider equity compensation in their financial planning, only 34% accepted their award, 39% exercised options and 25% sold shares.
Employees who include company stock in their financial planning are also twice as likely to work harder than employees who do not and are three times as likely to feel more loyal to their employer.
Moreover, those who include company stock in their planning activities are twice as likely to feel that their stock award provides a sense of ownership in the company.
The survey found that 59% of employees who include equity compensation in overall financial planning feel more confident about their ability to make good decisions with regard to their company’s plan, compared with just 34% of those who do not do so.
In addition, employees who include stock awards in their financial plan are three times as likely to say they have improved overall financial confidence.
The research also showed that 61% of these employees are likely to value their plan highly and are much likelier to recognize the tangible value of their company stock awards, compared with 30% of respondents who do not include company stock in their financial planning.