PHOTO: Kevin Hutchinson / Flickr / Creative Commons License
Financial advisors regularly ask us for suggestions on where to find companies in their area that grant equity compensation to employees. Unfortunately, finding local companies that offer employee stock options or restricted shares isn’t easy. There isn’t a “list” that can be acquired or bought and here is why……
Major financial advisory firms (i.e. Merrill Lynch, E*Trade, etc.) have invested hundreds of millions in Stock Plan Administration platforms to get access to companies and individuals who receive equity compensation grants. Their objective is to convert Stock Plan Participants into customers and then help them to diversify and reinvest their company stock and options. The opportunity is enormous so these stock plan services firms have the inside track and carefully guard this information.
Consequently, all other advisory firms need to do a little detective work to identify local equity granting companies. Here’s one approach:
- Identify all the companies that are located in your area including main and satellite offices. Use resources like the chamber of commerce, local business listings, web research and simply driving around. NOTE: Both public and private companies grant equity to employees but it is easier to identify and research publically traded companies.
- After assembling a list of companies in your area, research them by going to http://finance.yahoo.com and identifying and entering their stock ticker symbols.
- Yahoo Finance contains a lot of information on publicly traded companies, but start by looking at “Insider Transactions” and the “Insider Roster” (links on the left side of the page) to see if the officers have sold shares or exercise options. Although companies often grant different types of equity to the rank and file, officer grants provide good clues regarding the company’s equity compensation program.
- Next, go to the “SEC Filings” link and find the 10-K Annual Report
- Select “Full Filing at EDGAR Online” and click the link in the table of contents for the “Form 10-K”
- Activate the “Find” function (control F in Internet Explorer)
- Search for phrases to get an idea of what types of equity the company is granting (i.e. Equity Compensation, Employee Stock Options and Restricted Stock/Units)
- This research should enable you to determine what the company is granting and whether the program is broad-based or focused on the officers only. The broader the program, the more prospects.
- Finally, use the “chart” function in Yahoo Finance to check how the stock price has faired over the last 10 years. If it’s up significantly and the company has granted options, these are likely to be “deep” in the money and ripe for diversification.
When you are done with these steps you’ll have a list of companies and an idea of 1) what they have granted, 2) how broad the program is and 3) how the stock has done over the last decade. You can then rank these companies by the opportunity they represent (i.e. A, B, C).
Now you need a plan for engaging the equity compensation recipients from these companies. Going thru HR can be a long and involved process to receive permission to conduct seminars or be included on a list of approved advisors. Alternatives to obtaining company approved access include getting referrals from current clients, meeting individuals at networking events, target marketing and social media.
Here are some articles from the StockOpter University that will help you pursue this market and engage executives with equity compensation:
- The Do’s and Don’t for Engaging Executives
- Elevator Pitch for Corporate Executives
- 8 Ways Advisors can Boost Referrals
Bill Dillhoefer is the vice president of Net Worth Strategies, Inc. a service firm specializing in equity compensation diversification tools. Connect with him on LinkedIn or follow him @StockOpter.