Fear Factor Hinders Employees from Taking
Action, but Confidence Would Soar with Help from an Advisor
A new survey from Schwab Stock Plan Services reveals that
employees who participate in equity compensation plans see the
long-term value of the benefit but are afraid of making a mistake
when exercising employee stock options or selling shares. More than
one-third of participants (36%) say equity compensation is the
reason or one of the main reasons they took their job.
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Marc McDonough, senior vice president,
Schwab Investor Services (Photo: Business Wire)
According to the nationwide survey of 1,000 equity compensation
plan participants who receive incentive stock options, restricted
stock awards and/or participate in employee stock purchase plans
(ESPPs), just 24 percent have exercised employee stock options or
sold shares that are part of their equity compensation. Fear of
making a mistake is a concern for nearly half (48%). Among those
who have never exercised or sold their equity compensation or ESPP,
34 percent admit to being worried about selling under the wrong
market conditions and 34 percent say they are afraid of potential
tax implications of making a wrong decision.
“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.”
The Road to Confidence: Financial Wellness is Key
According to the survey, equity compensation can serve many
important functions in participants’ overall financial strategies.
While employees utilize their benefits in multiple ways, they are
most likely to do so to get needed cash (35%), make a large
purchase (28%) or help prepare for retirement (11%). The average
total value of their equity compensation is $72,245, and
approximately two-thirds (63%) of employees are fully vested.
But the survey demonstrates that many equity compensation
participants could use help in making the most of their benefit.
Only half of respondents are confident in their ability to make the
right decisions about their plan on their own. Millennials report
being the most confident (58%), versus 44 percent of Gen Xers and
39 percent of Boomers. Meanwhile, 80 percent of all respondents say
they would be much more confident with the help of a financial
advisor. Respondents would like advice on 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%).
Additionally, survey participants say they would take advantage
of a financial wellness program – which would provide education,
tools and resources to help with their overall financial health –
if it were offered by their employer. The survey revealed that
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. But there is a wide access
gap when it comes to wellness. Only 43 percent of respondents’
employers currently offer a workplace financial wellness plan.
When considering the components of a financial wellness program
they value the most, respondents say they want a holistic plan that
goes beyond just equity compensation advice. They are looking for
resources to help them with planning for retirement (65%), a free
or discounted consultation with a financial advisor (51%), help
with personal wealth building (45%) and help with developing
savings goals (44%).
Banking on the Future: Equity Compensation and Long-term
Wealth Building
The study reveals approximately 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%). Boomers (84%) and Gen Xers (81%) are most likely
to consider equity compensation as part of their long-term plan,
compared to 31 percent of Millennials who expect to use their
equity compensation in the short-term.
The top reasons why employees say equity compensation is an
essential or very important benefit are:
- They believe it will help them to
significantly build their wealth (55%);
- It allows them to participate in the
growth of the company for which they work (52%); and
- It provides them with greater control
over their finances (44%).
Equity compensation plans also play a large part in employee
loyalty. In fact, 11 percent of respondents say they would not
consider leaving for another job at all and 28 percent say they
would not consider joining a new company until after the next
vesting event at their current job.
“Employers offer equity compensation to reward employees, drive
engagement and improve recruiting and retention. The good news for
employers is that it’s working. Employees clearly place a high
value on these programs, but they are also asking for more help.
Delivering that help is the next best step employers can take to
further increase the effectiveness of their equity compensation
programs,” McDonough said.
About the Survey
This online survey of equity compensation participants was
conducted by Koski Research for Schwab Stock Plan Services. Koski
Research is neither affiliated with, nor employed by, Schwab Stock
Plan Services. The survey is based on 1,000 interviews and has a 3
percent margin of error at the 95 percent confidence level. Survey
respondents worked for companies that offer equity compensation
plans, are currently participating in an equity compensation plan
and were 25-70 years old. Survey respondents were not asked to
indicate whether their employer has accounts with Schwab Stock Plan
Services. All data is self-reported by study participants and is
not verified or validated. Respondents participated in the study
between September 18 and September 29, 2017. Detailed results can
be found here.
About Charles Schwab
At Charles Schwab we believe in the power of investing to help
individuals create a better tomorrow. We have a history of
challenging the status quo in our industry, innovating in ways that
benefit investors and the advisors and employers who serve them,
and championing our clients’ goals with passion and integrity.
More information is available at www.aboutschwab.com. Follow us
on Twitter, Facebook, YouTube and LinkedIn.
Financial tools and resources are available at
www.schwabmoneywise.com.
Disclosures
BROKERAGE PRODUCTS: NOT FDIC-INSURED · NO BANK GUARANTEE ·
MAY LOSE VALUE
Schwab Stock Plan Services provides equity compensation plan
services and other financial services to corporations and employees
through Charles Schwab & Co., Inc. (“Schwab”). Schwab, a
registered broker-dealer, offers brokerage and custody services to
its customers.
Through its operating subsidiaries, The Charles Schwab
Corporation (NYSE: SCHW) provides a full range of securities
brokerage, banking, money management and financial advisory
services to individual investors and independent investment
advisors. Its broker-dealer subsidiary, Charles Schwab & Co.,
Inc. (member SIPC, www.sipc.org), and affiliates offer a complete
range of investment services and products including an extensive
selection of mutual funds; financial planning and investment
advice; retirement plan and equity compensation plan services;
compliance and trade monitoring solutions; referrals to independent
fee-based investment advisors; and custodial, operational and
trading support for independent, fee-based investment advisors
through Schwab Advisor Services. Its banking subsidiary, Charles
Schwab Bank (member FDIC and an Equal Housing Lender), provides
banking and lending services and products. More information is
available at www.schwab.com and www.aboutschwab.com.
©2018 Charles Schwab & Co., Inc. All rights reserved. Member
SIPC (0218-8AAY)
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Charles SchwabMike Peterson,
330-908-4334mike.peterson@schwab.comorIntermarket
CommunicationsMike Gelormino,
212-754-5479mgelormino@intermarket.com
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