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Schwab Survey: Employees With Company Stock Plans Welcome More Financial Advice as COVID-19 Drives Participants to Exercise or Sell Shares

New research from Schwab Stock Plan Services shows the impact of the COVID-19 pandemic on equity compensation plan participants’ decisions. The survey finds that of those who recently exercised or sold equity compensation, two-thirds (67%) were influenced by the market volatility and economic downturn related to the pandemic.

The survey, 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), also finds that almost two in five (39%) survey respondents say that they are more likely to need financial advice due to the pandemic.

“Without question, 2020 has introduced an unprecedented level of uncertainty, forcing participant investors to reprioritize their long- and short-term financial needs,” said Amy Reback, vice president of Schwab Stock Plan Services. “For many, reprioritizing those needs is a practical response to an unexpected event such as a furlough, reduced income or unexpected medical expenses. 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.”

While the majority of participants are planning to use their equity compensation for retirement (51%), there was a slight uptick overall this year in those turning to their equity compensation to help meet immediate financial needs, like paying off debt (9%, up from 5% in 2019) and short-term emergencies (7%, up from 5% in 2019). Notably, Millennials have experienced a more pronounced impact compared to other generations and may be in more need of help in developing a financial plan. Ninety-five percent (95%) of Millennials who recently exercised or sold equity compensation report that the pandemic influenced their decision, and almost a third (27%) of this group did so because they were under financial stress.

While more than three-quarters of survey participants reported satisfaction with their employers’ communications about their equity compensation plans during the pandemic, most (85%) would like their employer to provide more education. A majority aren’t sure how specific equity compensation types fit into their portfolio, and their confidence about making the right decisions increases from 73% to 83% when they have the help of an advisor.

Against the backdrop of COVID-19, the top three areas where employees currently need the most help and advice are retirement planning (32%), investing (28%), and taxes (25%). These are followed by developing a financial plan (22%) and balancing equity compensation with other investments (22%).

Win-win long-term benefits: Talent retention meets individual wealth building

Equity compensation plays an important role in the employer-employee relationship. More than three-quarters of respondents (77%) say that equity compensation is a very attractive benefit, and an increasing number consider it to be the main reason or one of the main reasons they took their current job (37%, up from 28% in 2019). Of note, Millennial respondents are the most likely generation to identify equity compensation as the main reason or one of the main reasons they chose their current employer (53%).

“Employees, especially Millennials, are demanding equity compensation as a highly desirable component of workplace benefits packages,” Reback said. “Employers who offer equity compensation beyond the C-Suite as part of their overall employee value proposition significantly differentiate themselves from those who only offer health and retirement benefits. 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.”

Equity compensation can also be a significant long-term wealth builder for individuals, and can help meet critical financial goals such as retirement. Forty-three percent (43%) of respondents have exercised or sold at least some of their equity compensation during their career, with 30% doing so as part of their long-term financial plans.

Currently, equity compensation makes up nearly a third (32%) of employees’ net worth on average, and for Millennials it makes up 43% of their net worth. Employees are, on average, 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 in 2019) 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 lower share price valuations for individual organizations and of participants exercising/selling their equity compensation.

“Equity compensation often represents a substantial amount of an individual’s wealth and the stakes are very high. Participant investors are more engaged with their finances than ever before due to the pandemic, and it’s our mission to provide the guidance and resources they need to achieve their goals, despite this crisis,” said Reback.

About the Equity Compensation Participant Survey

This online survey of equity compensation participants was conducted by Logica Research for Schwab Stock Plan Services. Logica is neither affiliated with, nor employed by, Schwab Stock Plan Services. The survey is based on 1,000 interviews and has a 3% margin of error at the 95% confidence level. Survey respondents worked for companies that offer equity compensation plans, are currently participating in an equity compensation plan and were 18-75 years old. Survey respondents were not asked to indicate whether they had equity compensation accounts with Schwab Stock Plan Services. All data is self-reported by survey participants and is not verified or validated. Respondents participated in the survey between July 26 and August 6, 2020. More details can be found here. Follow Schwab Stock Plan Services on LinkedIn for additional information.

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 aboutschwab.com. Follow us on Twitter, Facebook, YouTube, and LinkedIn.

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, SSB (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.

©2020 Charles Schwab & Co., Inc. All rights reserved.

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Contacts:

Mike Peterson
Charles Schwab
330-908-4334
mike.peterson@schwab.com

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