Survey Finds That Financial Planning Improves Participant Perceptions Of Equity Awards

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A couple of years ago, UBS started a research project called UBS Participant Voice, a series of surveys seeking to canvas the attitudes of stock plan participants toward their equity awards (see our blog commentary on the first survey). The latest survey in the series, which obtained responses from more than 1,000 stock plan participants across a variety of industries, delivers some interesting insights into the value employees both perceive and actually get from equity awards. These insights may be useful both to equity-granting companies and to financial advisors who have clients with stock compensation.

The research starts with a formula, called the UBS Equity Award Value Index, that UBS has engineered to assess employee perceptions of equity awards. The factors going into the index score, which runs from 1 to 100, include the following:

  • the plan participant’s view of stock compensation (wealth-builder, paycheck-booster, lottery ticket?)
  • the importance the participant places on taking his or her job
  • the importance of keeping that job
  • the importance of accumulating savings or wealth
  • the extent to which equity comp is included in a long-term financial plan

UBS finds that only 9% of its survey respondents place a “high value” on their equity awards (defined as the group scoring between 81 and 100). Just under 50% view their grants as having “considerable” or “moderate” value (a score between 41 and 80). Surprisingly, a whopping 45% of the survey respondents said that they feel their grants have “minimal value” (14%) or “no value” whatsoever (31%).

Clearly, there is much work to be done to raise the perceived value of equity awards among stock plan participants (one of the reasons we started 16 years ago). Perceived value matters because, as UBS points out, “each year companies grant more than $110 billion in equity awards, clearly a sizeable expense.”

How To Increase Perceived Value

According to the survey findings by UBS, one way to improve employees’ perceptions of equity awards may be to encourage practical financial planning with grants. In short, UBS finds that stock plan participants are more likely to perceive high value in their equity awards when they take three steps:

Returning to the UBS Equity Award Value Index, the survey reports that the average score of participants who take none of these steps is only 27 (“minimal value”). Meanwhile, respondents who have taken all three steps have an average score of 55 (“moderate value” in the perception scale), i.e. twice the average of the others. Moreover, almost 80% of those who have taken the three planning steps agreed with the statement “I feel highly confident in achieving my financial goals,” but only 36% of the nonplanners did.

In other words, there seems to be a correlation between basic financial planning and perception of grant value. According to UBS, employees view their equity awards more favorably and become financially more confident when they include equity awards in financial planning. By extension, this also implies that stock plan education should include guidance on financial planning for equity awards and how to fit grants into preparations for important life events and goals (e.g. college funding or retirement), as does in its sections Financial Planning and Life Events.

Diversification: Proactive Participants View Grants More Favorably

Some of the other findings of interest in the UBS survey involve diversification. Throughout the surveyed employees, the portion of company stock among investable assets averages about 20%. Just over half of the employees have holdings of their companies’ stock in excess of the amount they would consider to be the limit of a comfortable level. UBS reports that when employees proactively diversify to avoid overconcentration in the stock of their employer, they tend to value their equity awards more than do employees who diversify for more reactive reasons, such as concerns about the company’s stock price. Once again, it seems that there is a correlation between proactive financial planning and favorable perceptions of grant value.



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