Equity Comp and Financial Planning Go Together Like Peanut Butter and Jelly

As an employer that offers an equity compensation plan for employees, there are likely a number of reasons that you provide this generous benefit. Perhaps you are looking to attract top talent in a competitive market, or incentivize and retain your top performing employees, or trying to ensure that employees values align with the interests of your shareholders. Whatever the case, when offering equity compensation to your employees, it stands to reason that you also want to ensure that employees are getting the most of their benefits. A recent study by Fidelity shows that one of the best ways to ensure the efficacy of your equity compensation plan is to also offer your employees access to financial planning that includes their equity compensation.

The study, conducted as a survey by Fidelity in June of 2020, found that employees that included their equity compensation plan in their financial planning:

• Were 2x as likely to feel their equity compensation plan was highly valuable
• Were 2x as likely to accept their equity awards
• Were almost 3x as likely to feel a sense of loyalty to their employer
• Were almost 3x as likely to state that their equity compensation plan improves their financial confidence

If those numbers aren’t compelling enough, diving deeper into the data tells an even more compelling story! Here are a few examples:

• 55% of respondents who consider equity compensation in their financial planning said that they include the value of stock plan benefits when calculating their total compensation, versus just 16% of respondents who do not include their equity compensation in their planning
• 53% of respondents who consider equity compensation in their planning said that it would be important that a new job offer a similar stock plan, versus 28% of respondents who do not consider the stock plan in their planning
• 59% of respondents who include their equity compensation in their financial plan said that they feel confident in their ability to make good decisions regarding the equity plan, versus 34% of respondents who do not consider equity compensation in their planning

All of this data begs the question, why is financial planning so important to helping employees realize the benefits of their stock plan? Well, in many cases, employees may feel uncertain about the future of the stock plan, or simply do not understand the plan in its entirety. A financial plan can help employees visual the impact of the stock plan on their overall financial health and future financial success, which immediately demonstrates that value of the plan. Likewise, a knowledgeable financial planner can help employees better understand the workings of their equity compensation plan, which ultimately improves the employee’s satisfaction with the plan.

As an employer that provides generous equity compensation benefits to your employees, it is imperative, both for your company and for your employees, that you help employees include their equity compensation in their financial planning. As demonstrated in the data, financial planning and equity compensation work best when the work together.

Source: Fidelity Stock Plan Services, 2021, Unlocking Success-for You and Your Employees.