Financial Wellness Programs: Why Equity Compensation Should be Included

It’s a brand new year. It’s a brand new decade, actually. Many of us consider the turnover to a new year as a time to reflect on past successes and failures, think about the future, set goals and make resolutions. Even though it’s no secret that most resolutions don’t survive past the month of January, year after year the pattern of thinking about our aspirations – health, financial, personal and professional – repeats. Given that January seems to be a time when many are thinking about the future, it seems like the perfect moment to cast a light on the gaining traction of employee focused financial wellness programs.

I’m going to admit right off the bat – I don’t have all of the answers today on how to best structure a financial wellness program (which typically includes guidance on, among other things, how equity compensation factors into overall financial planning considerations). What I do know is that over the past year, I’ve seen a lot of data on stock plan participant attitudes, behaviors, and desires. A consistent theme has emerged, and that is that participants want more education and guidance in the area of financial wellness. This month we’re going to tackle that topic, and I’m inviting the many service providers who are well versed in offering these programs to reach out to me to share their insights. This will be a multi-part blog series.

Setting the Stage: Why Equity Compensation Should be Part of Financial Wellness Education

First of all, what is a financial wellness benefit? A recent Forbes article described it as the following: "It is the glue that drives how employees feel about and use their compensation and benefits to achieve their financial goals. It’s also a major indicator of your culture and commitment to your employees." ("Considering a Financial Wellness Program For Your Employees: Make Sure You Ask These Questions First" - Liz Davidson, Forbes, March 3, 2019).

In deciding to implement or expand a financial wellness program, it’s first important to understand why this would matter to employees. It also feels necessary to remove some stigma around the dreaded and fragile terrain of “giving financial advice.” I’m being intentional in not citing a lot of specific data in today’s blog – mostly because I have a fair amount of data on this topic and will organize it into more digestible chunks in the other parts of this series. My high level view on financial wellness programs is that:

• There appears to be a direct correlation between participant education (including financial education) and the perceived value of equity awards. Bottom line: minimal or absence of education results in low perceived value placed on equity awards.
• Participant study/survey after participant study/survey data suggests that employees WANT more education around incorporating equity compensation into a financial plan.
• The majority of US workers (78%, according to a 2017 survey by CareerBuilder) live paycheck to paycheck and are likely subject to ongoing financial stress.
• Equity plan communication and education efforts have, in many instances, been conducted in a silo – independent of education and training on other benefits.  How many of those of us who’ve been in the stock plan administration role have conducted stock plan specific training and education and only stock plan education – leaving the rest of the benefits education (not even counting or considering financial wellness topics) to HR or other providers? Kudos to those who are making efforts to communicate with stock plan participants. However, it’s becoming increasingly apparent to me that if we conduct stock plan education as a stand-alone, we are missing an opportunity to aid participants in connecting the dots to their overall financial picture. Essentially, stock plan education in a silo could leave the participant to try and connect a maze of dots on their own. This seems like a recipe to under-deliver in the area of driving perceived value of equity awards.
• The thought of the stock plan administrator conducting overall financial planning sessions is sure to raise the hair on the arms of many. Fear not – that’s not my suggestion. Many of our third party providers have stepped up their offerings in this area – recognizing the need to include equity compensation in a financial planning model that can be available to the broad base of participants in the form of a wellness program implemented in partnership with the company. This means much of the financial education would be offered by the service provider, not the company itself.   

The next installment in this series will focus on the components of a financial wellness program. Until then, wishing you all much success with your New Year’s resolutions. Fun fact: If you can stay on track with your goals into February, you’ve greatly increased your chances of success!

-Jennifer