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Financial Planning for Employees

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May 19, 2011 | Rachel Murillo

Financial Planning for Employees

The NASPP's virtual Vendor Exhibition Hall holds a fantastic list of service providers. Our Vendor Hall also hosts the Press Box, where you can see the latest news and events from our service provider members. Yesterday, this press release from UBS caught my eye--it highlights a survey they conducted showed that over 94% of surveyed participants "felt it was critical for them to fully understand how stock plan assets fit into their overall financial situation."

I think that a lot of companies don't take this aspect of employee education into consideration, but it can be important to how your employees perceive the value of their equity compensation. This isn't true just for your executives or higher level employees, but all employees receiving equity compensation. The fact is that the more tools employees have to leverage the value of their equity compensation, the more they will actually value it. Most employees don't even have a financial plan, let alone understand how to incorporate something like the timing of option exercises or disposition of ESPP shares into that plan. They often don't know when or how to diversify, how to navigate the impact of taxes due on transactions, or how to use their equity compensation to build personal wealth. An employee who has a plan for his or her future that emphasizes the company's equity compensation is more likely to feel personally invested in the future success of the company.

However, there are two major difficulties with providing the best tools. First, too much information can be overwhelming and, therefore, counter to the goal of empowering employees. Second, companies don't generally want to get in the business of advising employees because they can't afford to be held responsible for poor investment decisions or unexpected market fluctuations. So, how do you go about providing employees with the financial planning guidance they need without just confusing them or opening your company up to unnecessary risk?

Some companies are comfortable with directing employees to one or more service providers to help guide employees. Brokerage firms all offer some kind of financial planning service. It may make the most sense for employees to build on an existing relationship rather than start an entirely separate one. You may even be able to get a representative or two from your broker's financial planning providers to participate in new hire orientations, employee benefits fairs or educational seminars at your company.
There are a good number of companies, however, that feel this type of promotion is too much like an endorsement of any personal guidance employees receive and not much less risky than providing advice directly. If that's the case at your company, here are some ideas for you:

Include it in your disclaimers - You should have disclaimers in your educational material that alert employees to consult a financial advisor. They may appear along with FAQs on exercises or tax implications--or may even be a part of your verbal responses to employee questions. If you remind employees that the broker they use to transact also offers financial planning and include a link or phone number, employees will at least know where they can go for advice.

Create an impartial list - Employees need help with financial planning for their retirement plans as well as their equity compensation. If you put together a list of firms that offer this type of planning advice and include your retirement plan provider, brokers, and even firms that are not also your service providers, your company may be more comfortable with assisting employees in this way.

Provide a space for peer recommendations - If your company intranet has any sort of discussion forum or listing service, you can create a space for employees to tell each other where they go for financial planning advice. With the right disclaimers, this removes the company from the process while still providing valuable resources to employees.

Whatever approach you take, I think it's important to understand that employees really are hoping to find someone to help them leverage the value of their equity compensation. The actions that employees take with their company stock are investment decisions; if employees feel they are making good decisions and creating wealth, they are far more likely to view their equity compensation as a benefit.


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