Schwab Study: Equity Plan Participants Average Nearly $100,000 in Vested Stock; Less Than Half Have Ever Sold or Exercised Their Shares
The study, which examines the attitudes and behaviors of 1,000 equity compensation plan participants who currently receive incentive stock options or restricted stock awards and/or participate in employee stock purchase plans (ESPPs), finds that 41% of respondents have exercised or sold at least some of their equity compensation during their career. Their main reasons for selling included:
- Thinking market conditions were favorable (41%),
- Being fully vested and wanting to cash out (27%), and
- Wanting to make a large purchase (25%).
The vast majority of those who have exercised their benefit, 88%, say they were very or extremely confident about selling. Millennials were more likely to be extremely confident in that decision than their Generation X or Baby Boomer counterparts (62%, compared to 36% and 40%, respectively).
Among those who have never sold or exercised their equity compensation, the top reasons were:
- Waiting for more favorable market conditions (38%),
- Being concerned about tax implications (30%), and
- Waiting for their equity compensation to become fully vested (28%).
“The workers we surveyed have a significant amount of their wealth in their equity compensation plans,” said
Equity Compensation: Playing a Role in Employees’ Financial Future
By and large, respondents consider equity compensation a long-term asset. Sixty percent say they will use it to help finance retirement, ranking it far above any other choice. For example, the next highest selections were financing their children’s education at 9%, financing their lifestyle in the short term at 8%, and paying off debt and buying a home, both at 5%.
Equity compensation makes up more than a quarter (27%) of employees’ net worth, on average – and more for Millennials than any other group (41%, versus 21% for Gen X and 20% for Boomers), as they have had less time in the workforce and less time to accrue assets through other investments. Most respondents (68%) also hold company stock outside of their equity compensation plan, primarily in their 401(k) plan.
Encouragingly, most participants are confident they will be able to use their equity compensation to reach their financial goals. Sixty-five percent say they are very or extremely confident, and another 28% say they are somewhat confident.
“It’s great to see that equity plan participants feel so confident about their benefits. However, some may encounter obstacles to meeting their goals if they remain overweighted in company stock. At Schwab, we suggest having no more than 10-20% of your overall portfolio in company stock,” added Reback. “Creating a financial plan – especially with help from a professional – can help you take a more holistic approach to managing your money.”
A Differentiator for Employers
The survey reveals the important role of equity compensation in the employer-employee relationship. About a third of respondents (31%) say it is an essential benefit and another 44% say it is very important. These respondents named the following advantages of equity compensation:
- It allows them to participate in the growth of their company (51%),
- It will help them significantly build/increase their wealth (50%), and
- It means the success of the company will play an important part in their own success (43%).
Nearly one in three respondents (28%) say the equity compensation offering was the reason or one of the main reasons they took their job, and that figure rises to 46% among Millennials. Moreover, 29% of participants say they wouldn’t consider another job until after their next vesting event, and 12% wouldn’t consider an offer from another company at all.
A Desire for Guidance
Most respondents, 82%, would like their employer to offer more education to help them understand equity compensation programs. The specific areas in which they want help from their employer include:
- Planning for retirement (68%),
- Using equity compensation to meet financial goals (55%),
- Developing a financial plan (52%), and
- Balancing equity compensation with other investments (51%).
More than half (54%) of respondents are already working with a financial advisor, and 78% of that group are getting help from the advisor with their equity compensation. Millennials are most likely to work with an advisor (60%), followed by Boomers (53%) and Gen Xers (47%).
“Even if you feel confident in your financial knowledge and decision-making abilities, taking advantage of financial wellness offerings at work or getting advice from an advisor can help you formulate a solid plan and make the most of your benefits,” Reback said.
Other Notable Findings
- When asked which sectors provide the best long-term value for employees with equity compensation, respondents named technology (31%), healthcare (19%) and financial services (17%). All other choices ranked substantially lower.
- About 6 in 10 respondents (61%) who are offered financial wellness resources at work currently use them. Financial wellness resources can include digital tools, financial coaching, education and other solutions to help employees take ownership of their personal finances.
About the Survey
This online survey of equity compensation participants was conducted by
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Schwab Stock Plan Services provides equity compensation plan services and other financial services to corporations and employees through
Through its operating subsidiaries, The