UBS
Wealth Management Americas today released its latest UBS
Participant Voice, an annual industry-wide survey designed to
provide insights about equity plan participants' attitudes and behaviors
across companies, industries and service providers. The UBS Equity Award
Value Index, launched in 2013, measures how participants perceive the
value of their equity awards. The latest research found that:
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Only 39% place considerable or high value on their equity award
whereas, one in five participants (21%)"perceives virtually no value."
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Two in five (40%) place minimal or moderate value in the equity awards
they receive.
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Eighteen percent of participants view their equity award merely as a
lottery ticket and seven in ten participants do not create or follow a
long-term planning for managing company stock holdings.
"Equity awards can be a great wealth driver for employees. Given that
each year companies grant more than $110 billion in equity to certain
employees*, this raises questions regarding the perceived value of these
awards and the missed opportunity to build long-term wealth," said
Michael Barry, head of UBS Equity Plan Advisory Services. “However, Participant
Voice revealed that there are some clear actions companies can take
that can have a huge impact on employee perception and participation.”
Participant Voice identified three core actions companies can
take to involve employees and drive engagement in equity compensation
plans; drive a strong culture, ensure plan design is straightforward and
deliver personalized advice. When companies perform highly in these
three areas, employees place significantly more value on their equity
awards.
Strong Culture
Culture has a strong impact on how employees view both their company’s
future and their own equity plans. Participants who believe their
company has a strong culture also believe in its growth potential: 91%
of participants who rate their company’s culture as “excellent”
described the long-term future of their company as “excellent” or “very
good.” As a result, participants who are part of a strong company
culture place significantly more value on their equity awards. When a
culture rating improves from “poor” to “excellent,” the UBS Equity Award
Value Index score sees a corresponding increase from 34 to 58.
Similarly, from a long-term company outlook of “very pessimistic” to
“very optimistic,” the UBS Equity Award Value Index score jumps from 34
to 56. Fostering a strong company culture leads to greater perceived
value of equity awards.
Straightforward Plan Design
When a company’s equity plan is well understood, the equity value score
is 55, as opposed to 37 when the plan is not understood at all.
Simplicity is key – the more straightforward the plan, the more easily
it is understood. Participant Voice found that participants view
ESPP plans as the least complex plan, while performance share plans are
considered the most complex.
Communications around key dates are particularly important factors for
driving equity award value perceptions. Accordingly, 78% of those
“extremely satisfied” with communications have a complete or near
complete grasp of their company’s equity plan. When satisfaction with
communications about key dates shifts from “not satisfied at all” to
“extremely satisfied,” the equity value index score leaps from 35 to 63.
Personalized Education and Advice
Education and personalized advice have a strong impact on how much
participants value their equity awards. As satisfaction with education
improves the Equity Award Value Index increases from 36 to 65. The most
effective education methods are one-on-one conversations, which is the
highest contributors to participants’ satisfaction with their equity
plan education according to 75% of respondents. For global participants,
tailored communications help to improve understanding of equity plans
and the value they place on equity awards: global participants who
receive tailored communications scored a 51 on the equity plan index vs.
a score of 45 for those who receive a generic version.
Similarly, providing personalized advice – contextualizing equity
compensation as part of a participant’s overall financial life – causes
participants to place more value on their equity awards. To illustrate,
participants who view their equity compensation as part of a long-term
plan have a significantly higher index score than participants who do
not (61 vs. 36).
“Personalized advice is the key to effectively communicating the
benefits of the equity award and leads to greater plan engagement. Participant
Voice found those participants who place a higher value on their
equity awards feel better about their financial situation and more
confident about achieving their goals,” said Mr. Barry. “And that client
confidence and satisfaction is our ultimate goal.”
Sector Specific
Interestingly, participants across different industries tend to place
different amounts of value on equity compensation. Surprisingly,
technology sector participants have the lowest index scores at 44. While
they feel optimistic about the long-term potential of their industry,
they are less certain about their own company's long-term prospects.
Participants who work in healthcare and financial services have an index
score of 52, while manufacturing scored a 51.
Funding Retirement
Participant Voice found that employees become increasingly
engaged with their equity awards within three years of retirement,
likely because they will be used to fund participants’ lives after work.
Thirty three percent of those nearing retirement say that they have
become more engaged with their company stock, while only 10% feel that
they have become less engaged.
Redefining "Long-Term"
Investor sentiment towards long-term investing has fundamentally changed
and so has the view of equity compensation awards. Participant Voice found
that 53% of participants are more involved with managing their
investments now compared to before the financial crisis and that 57% of
participants are more skeptical about financial markets and long-term
investing today compared to before the financial crisis. Regarding the
long-term investment horizon, before the financial crisis 44% of
participants considered it to be 10 years or more, today only 30% do.
Another indicator of this shift, today only 30% of participants pick an
investment and stick with it for the entire duration, down from 45%
before the financial crisis.
UBS Equity Plan Advisory Services currently serves more than 150
companies representing more than one million participants in over 150
countries, delivering customized solutions and providing access to
advice to all plan participants. UBS Equity Plan Advisory Services
provides both partial and full plan administrative services, offering
customized plan administration based on specific company needs.
In the past four years, UBS has invested nearly $200 million to bring
clients cutting-edge technology and industry expertise. UBS Equity Plan
Advisory Services earned the highest rating for partial and a top rating
for full administration services, the only firm to be so highly rated in
both categories, in the Group Five 2013 Stock Plan Administration
Satisfaction Study.
We invite you read the full report here: https://secure.viewer.zmags.com/publication/b8c1b4ea
*Equilar, Inc. Based on 2,885 companies in the Russell 3000, that have
fiscal year-ends of July 31, 2012 or more recent, and valued the
grant-date fair value of options, stock appreciation rights, restricted
stock and stock unit awards granted by companies during the most recent
fiscal year. All information was pulled from the 10-K and was calculated
using company-disclosed figures for grant-date fair value.
Methodology
The survey was fielded from May 14 – 20, 2014. It was an online, blind
survey conducted of investors and clients using an external vendor
(Research Now). 1,176 plan participants, who currently receive equity
compensation from their company, completed the survey.
Notes for Editors
About UBS Wealth Management Americas
UBS Wealth Management Americas provides advice-based solutions and
banking services through financial advisors who deliver a fully
integrated set of products and services specifically designed to address
the needs of ultra high net worth and high net worth individuals and
families. It includes the domestic US business, the domestic Canadian
business and international business booked in the US.
About UBS
UBS draws on its 150-year heritage to serve private, institutional and
corporate clients worldwide, as well as retail clients in Switzerland.
Its business strategy is centered on its pre-eminent global wealth
management businesses and its leading universal bank in Switzerland,
complemented by its Global Asset Management business and its Investment
Bank, with a focus on capital efficiency and businesses that offer a
superior structural growth and profitability outlook.
UBS is present in all major financial centers worldwide. It has offices
in more than 50 countries, with about 35% of its employees working in
the Americas, 36% in Switzerland, 17% in the rest of Europe, the Middle
East and Africa and 12% in Asia Pacific. UBS employs about 60,000 people
around the world. Its shares are listed on the SIX Swiss Exchange and
the New York Stock Exchange (NYSE).
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Copyright Business Wire 2014