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EP 63 - Equity Compensation Trends

Equity Compensation plans are becoming more and more popular, with job-seekers asking about EC as a possible option for remuneration from their potential employers. Over ¾ of respondents to a recent Charles Schwab survey said Equity Compensation is an essential or important benefit to them because it helps build personal wealth, allows them to participate in the growth of their employer, and they believe that their company’s success will lead to their personal success. But there are also trends relating to how EC recipients are using their compensation and how and why they are selling their positions (when they do). This episode highlights some of the trends we see happening and gives you some insight into what aspects of that data means. 

You will want to hear this episode if you are interested in...

  • Equity compensation wasn’t a focus until after WWII [0:20]
  • How does EC fit into your investment portfolio [2:50]
  • This week’s FLASHBACK: A big Christmas tree “Oops!” [5:23] 

Just under half of EC holders have sold some of their holdings

During this last year, as COVID has impacted industries across the board, many investment and savings decisions had to be modified. This was no different for those who hold Equity Compensation in their companies. A recent survey done by Charles Schwab reveals that those who did sell some of their stock positions (just under half) did so for a variety of reasons…

  • Some were looking to diversify their investment portfolios
  • Others were creating cash to make a large purchase
  • ⅔ said Covid influenced their decision to sell or not to sell
  • Millennials sold at a higher percentage than older employees

As you can see, EC plans are nice to have when it comes to living in our crazy world.

So, you do need help optimizing your Equity Compensation plan… or don’t you?

In the Schwab survey two contrary pieces of data emerged. 1 of 5 respondents said they need help balancing EC with their overall investments. This makes sense since Equity Compensation plans can be difficult to manage at times. Consistent with that response, 85% of employees say they would like more employer education on EC plans. Here’s where the contrary information comes in. When asked if they feel confident in the decisions they are making with their Equity Compensation plans, 70% of respondents said YES. Really?

I created this podcast because of this very confusion. People repeatedly ask for clarification regarding EC positions they hold and I specialize in this particular form of compensation. I trust the podcast serves you well.

⅓ said EC was a part of why they chose their existing position

90% would choose a public company if they had a choice, and IF it had an EC program

Almost 9 out of 10 want to be able to choose what type of EC they are offered

Half plan to use EC for retirement

This week’s FLASHBACK: 

My Mom once reserved a Christmas tree and my brother and I went to pick it up. We tried to tie the tree in the back of the truck with an electrical cord. The tree flew out of the back of the truck and landed in the middle of the highway. Listen to hear how the tree fared… and how our mother responded.

Resources & People Mentioned

  • The Charles Schwab Equity Compensation Survey for 2020 (mentioned)

I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.