Wealth strategies for executives: Making the most of your equity compensation

Executives in senior leadership positions, including those in the C-suite, often receive substantial
equity compensation as part of their incentives. However, this doesn’t automatically mean they
always know how to fully capitalize on the opportunities these equity awards offer.

Bob Fritz, Head of Executive Advisory at J.P. Morgan Private Bank, highlighted this issue during a
discussion with hosts Lauren Jenkins and Chris Dohrmann on the latest episode of our “Prosperity at
Work” podcast.

Financial planning for business leaders

In his role, Bob regularly meets with top business leaders and assists them with their financial
planning, in terms of ongoing wealth accumulation and provisions for retirement. What he has found
is that it isn’t necessarily correct to assume that senior executives are always up to speed on how
best to manage their equity compensation and broader financial picture.

“Think about what a C-suite executive is going through. They’re spending the vast majority of their
time running the business. That’s their job and it consumes them most of their days. Then, on the
weekends, when they’re kind of off the clock, they want to spend time with their family and friends
and do all those other things. So, while they’re really smart and experienced, they don’t always
spend the time to analyze their own compensation and benefit plans as much as they should,” he
said.

Bob added that his role and that of the Executive Advisory Group at J.P Morgan Private Bank is partly
about offering a service that helps senior executives to bridge that gap.

“The value we bring is helping them to digest those relatively complex issues. To understand them as
people and guide them very efficiently and effectively towards the right decision for them and
identify where it sits with their personal financial planning. And if we can do that in the course of 10
to 30 minutes, that’s what they’re looking for from the service we provide,” he said.

Bob stressed that senior executives need to look to make the right decisions around equity and
finance in general throughout their career or else risk “some bad outcomes down the road.”

Where are they on the executive career lifecycle?

Bob identified three distinct phases in an executive’s career:

• The emerging executive: New to the C-suite and possibly being introduced to equity plans and deferred compensation plans for the first time.
• The existing executive: Has been part of one or more plans for at least a few years and has accumulated wealth. Equity has become a bigger part of their personal financial plan.
• The exiting executive: Looking to retire or move on and will hopefully have made the right decisions over time to lock in the wealth they accumulated during their C-suite years.

Bob stated that executives in corporate America tend to be aware of their own strengths and
weaknesses; when they know that they don’t know something, in this instance the complexities of
their own equity compensation package, the most efficient way to address that can be to reach out
to specialists whose job it is to know.

Going beyond basics

“The clients that I’ve met over 30 plus years will come and say, look, I understand the basics of it, but
what should I do? What are the specific intricacies of the plan that I should understand, and how
does that impact me personally? How does that benefit my financial wellness down the road, so that
I can make the right decision? They realize that they know a lot. They’re very smart people, but if
they can have somebody guide them to the right decision, that’s where they want to be,” he said.

When asked how companies can look to ensure their executives receive the necessary education to
be sufficiently literate around their own equity compensation, Bob stated that ideally companies
would provide those individual with a resource which understands their comp and benefit plans
thoroughly.

“If executives are armed with that kind of resource, it will be very valuable. When you’re in the
human resources area and you’re designing and developing and rolling out different benefit plans,
you want to make sure that the executives are taking advantage of them the right way, that they
understand and maximize them. Unfortunately, HR really can’t be that resource, because they don’t
always understand the executives’ specific interest in their own personal planning. So, if they can
combine rolling out of the benefit plan with some experts around it, that can help the executives get
to a decision while honoring their time, that would be a positive outcome,” he said.

Listen to the full interview here.

How can we help?

If you want to speak to someone about your executive equity awards or want to learn more about
how J.P. Morgan Workplace Solutions can work with you to design and implement an offering,
contact us today.