Employees—especially younger employees—may be putting too much stock in their companies’… well, stock.
A new survey from Schwab Stock Plan Services discovered many employees have overweighted their portfolios with company stock. Millennials are the biggest culprits, with an average of 42 percent of their net worth tied up in equity compensation.
The older generation of workers are often overdoing it, too, albeit to a lesser degree. Generation X employees have invested an average of 24 percent of their net worth in company equity. Among Baby Boomers, this figure is 19 percent.
Data suggests employees could be doing this deliberately. More than eight in 10 surveyed said that they have rebalanced their investment accounts within the year or that they are adjusted automatically.
Two-thirds of employees contend they took their equity compensation into consideration when doing so.
“For some investors, too much company stock can be too much of a good thing,” Marc McDonough, senior vice president, Schwab Workplace Financial Solutions, said in a statement.
Dedicating one’s professional life to a company he or she believes in? Ideal. Betting one’s financial future on the performance of that company? Not so much.
The company recommends the typical investor allocate no more than 10 to 20 percent of their total portfolio to company stock.
Of course, there are exceptions—one of many reasons working with an advisor is essential.
“It’s clear that employees value their equity compensation as a major driver of wealth, but they must also appreciate how important it is to diversify,” said McDonough. “With so many variables, we encourage employees to ask for help to make sure they are thoughtfully integrating their equity compensation into their overall financial picture.”
Most survey respondents appear to recognize the importance of professional guidance; yet, few have sought help.
Three in four said they’d be extremely or very confident about decisions surrounding equity compensation if they were working with a financial advisor. But instead, 37 percent got advice on managing their accounts from independent research, compared to merely a quarter who worked with an advisor and 16 percent who consulted their employer.
Jessa Claeys is a writer, editor and graphic designer.
