Schwab Study: Equity Plan Participants Average Nearly $100,000 in Vested Stock; Less Than Half Have Ever Sold or Exercised Their Shares

According to new research from Schwab Stock Plan Services, the average vested value of U.S. workers’ equity compensation is $97,711 and the average total value of their equity compensation is $149,835.

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 Amy Reback, vice president, Schwab Stock Plan Services. “The data shows that they are making decisions about this benefit largely based on market conditions; while that and their outlook for their company are important factors, it’s also worth considering the value of equity compensation in the context of your overall financial picture. It’s important to keep a diversified portfolio and make decisions that take into account both short- and long-term goals.”

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 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. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between July 1 and July 16, 2019. 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 www.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 (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.

©2019 Charles Schwab & Co., Inc. All rights reserved. Member SIPC

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