Survey Indicates that Stock Plan Participants Need More Than Education

The Morgan Stanley at Work 2021 Annual Stock Plan Participant Survey contained a number of notable findings regarding equity compensation programs and recipients including:

• Most respondents (75%) feel confident in their ability to access their stock plan account online, but only half (52%) understand how to sell their company shares.
• 66% aren’t confident that they understand how taxes may affect their stock plan benefits.
• Only one out of three participants (33%) are very or extremely confident they know how to maximize the financial benefit of their company stock and/or options.
• Although 60% of respondents have sold shares and/or exercised options, few chose to reinvest the proceeds. Instead, most opted to spend or deposit the cash.

These findings indicate plan participants need professional guidance on top of top of the equity compensation tools and education provided online. This represents a big opportunity for independent and planning oriented financial advisors that don’t have a conflict of interest like stock plan provider firm. The conflict is the result of the provider firm’s relationship with both the issuing company and the stock plan participant.

Stock plan education is important, but it only goes so far. Plan participants need personalized guidance based on a process that provides insights on concepts such as equity compensation risk, concentration, leverage and volatility.  This information establishes a framework for making informed decisions.  Additional strategy modeling and detailed tax planning enable company stock and option recipients to optimize their plans for tax and cash flow efficiency.

Unfortunately, most stock plan participants are getting guidance from the company “water cooler” instead of an unbiased financial advisor. Every company has a “Fred from Engineering” who has developed a spreadsheet to assist other employees.  This is a poor substitute for professional guidance which is reflected in the low confidence findings of this and other surveys.

Financial advisors need to adopt a repeatable, comprehensive and efficient process for providing equity compensation guidance in order to engage these recipients and fill in the gaps of online education.