Press Release

A new survey from Schwab Stock Plan Services reveals that employees who participate in equity compensation plans see the long-term value of the benefit but are afraid of making a mistake when exercising employee stock options or selling shares. More than one-third of participants (36%) say equity compensation is the reason or one of the main reasons they took their job.

According to the nationwide survey of 1,000 equity compensation plan participants who receive incentive stock options, restricted stock awards and/or participate in employee stock purchase plans (ESPPs), just 24 percent have exercised employee stock options or sold shares that are part of their equity compensation. Fear of making a mistake is a concern for nearly half (48%). Among those who have never exercised or sold their equity compensation or ESPP, 34 percent admit to being worried about selling under the wrong market conditions and 34 percent say they are afraid of potential tax implications of making a wrong decision.

“Tens of millions of Americans participate in equity compensation programs and most recognize their importance, but many are unsure of how to maximize their value,” said Marc McDonough, senior vice president, Schwab Investor Services. “When managed correctly, equity compensation can play a meaningful role in building wealth. The survey made it clear that employees would benefit from more help in understanding the role this benefit can play in their long-term financial plan.”

The Road to Confidence: Financial Wellness is Key

According to the survey, equity compensation can serve many important functions in participants’ overall financial strategies. While employees utilize their benefits in multiple ways, they are most likely to do so to get needed cash (35%), make a large purchase (28%) or help prepare for retirement (11%). The average total value of their equity compensation is $72,245, and employees are an average of 63 percent vested in their equity compensation.

But the survey demonstrates that many equity compensation participants could use help in making the most of their benefit. Only half of respondents are confident in their ability to make the right decisions about their plan on their own. Millennials report being the most confident (58%), versus 44 percent of Gen Xers and 39 percent of Boomers. Meanwhile, 80 percent of all respondents say they would be extremely or very confident making equity compensation decisions with the help of a financial advisor. Respondents would like advice on the tax implications of their decisions (50%), using the benefit to help prepare for retirement (44%) and knowing when to exercise or sell their equity awards (35%).

Additionally, survey participants say they would take advantage of a financial wellness program – which would provide education, tools and resources to help with their overall financial health – if it were offered by their employer. The survey revealed that two-thirds of respondents who have access to this benefit take advantage of it, and most participants (96%) find it helpful when making equity compensation decisions. But there is a wide access gap when it comes to wellness. Only 43 percent of respondents’ employers currently offer a workplace financial wellness plan.

When considering the components of a financial wellness program they value the most, respondents say they want a holistic plan that goes beyond just equity compensation advice. They are looking for resources to help them with planning for retirement (65%), a free or discounted consultation with a financial advisor (51%), help with personal wealth building (45%) and help with developing savings goals (44%).

Banking on the Future: Equity Compensation and Long-term Wealth Building

The study reveals approximately three-quarters (76%) of respondents consider equity compensation part of their long-term financial plan, and most say their equity compensation helps them feel less stressed about their finances (76%) and more prepared for retirement (63%). Boomers (84%) and Gen Xers (81%) are most likely to consider equity compensation as part of their long-term plan, compared to 31 percent of Millennials who expect to use their equity compensation in the short-term.

The top reasons why employees say equity compensation is an essential or very important benefit are:

• They believe it will help them to significantly build their wealth (55%);
• It allows them to participate in the growth of the company for which they work (52%); and
• It provides them with greater control over their finances (44%).

Equity compensation plans also play a large part in employee loyalty. In fact, 11 percent of respondents say they would not consider leaving for another job at all and 28 percent say they would not consider joining a new company until after the next vesting event at their current job.

“Employers offer equity compensation to reward employees, drive engagement and improve recruiting and retention. The good news for employers is that it’s working. Employees clearly place a high value on these programs, but they are also asking for more help. Delivering that help is the next best step employers can take to further increase the effectiveness of their equity compensation programs,” McDonough said.

About the Survey

This online survey of equity compensation participants was conducted by Koski Research for Schwab Stock Plan Services. Koski Research is neither affiliated with, nor employed by, Schwab Stock Plan Services. The survey is based on 1,000 interviews and has a 3 percent margin of error at the 95 percent confidence level. Survey respondents worked for companies that offer equity compensation plans, are currently participating in an equity compensation plan and were 25-70 years old. Survey respondents were not asked to indicate whether their employer has accounts with Schwab Stock Plan Services. All data is self-reported by study participants and is not verified or validated. Respondents participated in the study between September 18 and September 29, 2017. Detailed results can be found here.

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.

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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.

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