Financial Planning: Good for Employees and Employers

You probably won’t be surprised to learn that it is beneficial to employees to include their stock compensation in their financial planning. A recent survey by Fidelity finds that their employers benefit from this as well (“Unlocking Success – For You and Your Employees").

When employees include equity compensation in their financial planning, Fidelity found that they are:

• Twice as likely to value the plan highly
• Twice as likely to accept their awards
• Nearly three times as likely to feel loyal to their employer
• Nearly three times as likely to say that their stock plan improves their financial confidence

Perceived Value

Whether your equity plan is ultimately able to achieve your objectives in terms of attracting, motivating, and retaining employees ultimately hinges on whether employees perceive it as valuable. Fidelity’s findings seem to indicate that financial planning can be just as important if not more important than education in terms of creating perceived value among employees.

56% of participants who understand their equity plan somewhat and include it in their financial planning perceive the plan as valuable, compared to only 39% of employees who understand their equity plan completely or somewhat but do not include it in financial planning.

In addition, among respondents who consider equity compensation in their financial planning, 61% highly value their company’s equity plan (vs. only 30% of respondents who don’t consider equity compensation in their financial planning) and 55% include the value of their equity when calculating their compensation (vs. only 16% of respondents who don’t consider equity compensation in their financial planning).

Loyalty

Fidelity found that employee financial planning that includes equity awards accrues benefits to the employer in terms of loyalty and hard work.  Among respondents who include equity compensation in their financial planning:

• Just over 50% feel more loyal to their employer as a result of their equity awards (vs. less than 20% of other respondents)
• Just over 40% work harder knowing that the stock plan will reward in line with company performance (vs. 20% of other respondents)
• Just over 60% say that the stock plan provides a sense of ownership in the company (vs. just over 30% of other respondents)
• Over 50% say that it is important to them that any future jobs offer a similar stock plan (vs. under 30% of other respondents)

Engagement

Fidelity also found that employees who include equity awards in their financial planning were more likely to take actions with respect to their awards than other employees, including accepting awards (72% vs. 34%), exercising options (53% vs. 39%), and selling shares (57% vs. 25%).

Employees who include equity awards in their financial planning were also more likely to report feeling confident in their decisions regarding their equity awards and that participating in the stock plan increases their financial confidence.