Equity Compensation and Retirement Readiness Linked

The latest installment of the UBS Participant Voice survey, subtitled the UBS Equity Award Value Index, finds that certain variables drive employees’ perception of the value of such compensation, including the role played in building wealth and the context in which employees put this compensation in relation to their broader financial plan.

For the index, employees fell into three distinct groups, each with its own unique perception about equity compensation. The first group consists of those employees who have had six or more vestings. This group views equity compensation as a way to build wealth. The second group consists of those with between three and five vestings. These employees view equity compensation as a supplement to their paycheck. The third group consists of those with three or fewer vestings. These people view equity compensation as a lottery ticket.

Within the “six or more” group, the survey authors say, “Employees with more vesting experience are also more confident in their decisionmaking about their equity compensation, as well as financial decisions overall. They feel optimistic about their financial situations and highly prepared for retirement.” Survey results show this group has the most investable assets.

The “three and five” group, say survey authors, “appear aware of the potential that their equity awards have, although they remain unsure how to maximize that potential. They are also keenly aware and concerned about the impact of market volatility on their equity compensation. As a result, these employees are seeking information from a wide variety of sources and are open to receiving guidance.” Survey results show this group is only somewhat prepared in terms of retirement planning.

The “three or fewer” group is “less confident about equity compensation decisions, as well as broader financial decisions, which speaks to a need for basic education.” Survey results show this group is the least prepared in terms of retirement planning and has the least in investable assets.

The groups also assign different importance to company stock/option grants. For the “six or more” crowd, 51% say equity compensation is a very important factor in accumulating wealth. Only 38% of the “three to five” group and a mere 20% of the “three or fewer” group say the same.

Additionally, when asked how they make decisions about their equity compensation, 58% of the “six or more” group say such decisions are part of their overall financial planning, while only 49% of the “three to five” group and just 46% of the “three or fewer” group say the same.

The survey is conducted on a semi-annual basis. This installment of it was carried out by Research Now on behalf of UBS. Between September 24 and 30, 579 employees who are members of an equity compensation plan completed a questionnaire online.

The full survey results can be downloaded here.