Executive Financial Planning

Are You Helping Your Executives Make Smart Financial Decisions Today?

Learn how working with a financial advisor who can offer unique approaches across financial wellness and equity compensation can mean happier executives.

Executives are faced with a unique set of financial challenges and opportunities. And your company plan design can be a key part of supporting this employee population. Here are some strategies to keep in mind.

At different stages of their careers, employees may have different financial goals—and with five generations currently in the workforce, the wide range of employee needs and concerns is now even more pronounced. While younger employees may be concerned about how to build up emergency savings, your executives may be thinking further ahead, about such things as the tax benefits of deferring compensation weighed against the necessity of being able to pay for their child’s college education. 

 

A benefits plan design that is one-size-fits-all lacks these distinctions. And employers may be missing the opportunity to design workplace financial wellness, retirement solutions and equity compensation plan benefits that meet employees where they are—whether those employees are junior staffers focused on paying down student debt, middle managers with a goal of buying a home or executives working through the complicated tax implications of various benefits decisions.

How does a company understand an employee’s needs at each life stage, and how do they match the benefits—especially services that are incredibly complicated?
Tom Conlon
Head of Retirement Sales, Morgan Stanley at Work

Having the ability to reach employees in the different stages of their lives matters, because when you help employees solve financial problems and meet financial goals, they tend to be more invested (literally and figuratively) in the company. Many companies only speak to plan design within their retirement offering. However, it’s important for benefits providers to consider plan design across their major financial benefits plans. Customizing your offerings by employee segment helps you ensure that the junior and mid-level employees in your organization are as well taken care of as the veteran leaders, because the today and tomorrow of your entire workforce matters.

 

Put another way: A career is a long and varied journey. “We’re talking about 40 to 50 years of saving for retirement, and then 20 to 30 years of drawdowns,” says Tom Conlon, Head of Retirement Sales, Morgan Stanley at Work. “How does a company understand an employee’s needs at each life stage, and how do they match the benefits—especially services that are incredibly complicated?”

 

And the executive segment is a great place to start, specifically because this group has a complex set of financial needs, which one-size-fits-all plans don’t account for.

 

The Financial and Tax Planning Challenges Executives Face

Whether an executive is seasoned or is moving into the C-suite for the first time, they have a distinct set of considerations around their portfolio. “They likely have some financial wealth already, and they probably have contractual obligations to have stock levels. They know they have to diversify, so how do they balance?” says Dee Crosby, Executive Director, Learning & Development, Morgan Stanley at Work.

 

Plus, executives may have deferred retirement income. This means they need to make decisions today that greatly impact their future—a future that includes retirement and perhaps leaving a legacy, but may also include helping an adult child reach a financial milestone like buying their first home. “Do the executives within your organization understand the ins and outs of nonqualified deferred compensation plans? There are large tax implications that can be quite complicated to figure out. If you’re not in financial services and well-versed in tax code, you likely need help,” Conlon says.

Also, with recent market conditions, some organizations are operating under tighter budgets. Executives who may have felt financially secure just a short time ago may now be re-evaluating their plans and thinking anew about their financial wellness.

 

Or they might be experiencing the opposite: For the first time, they feel financially secure, but with that increased wealth comes unfamiliar obligations. “When someone moves into an executive position for first time, they suddenly have access to brand-new services they are not used to, and they need guidance on how to meet contractual agreements,” Crosby says.

 

How Plan Design Can Help Executives

With these challenges in mind, here are some insights into how good plan design can help your executives:

  1. Offer well-rounded advice

    Offerings that pull together tax professionals, legal advisors, and Financial Advisors can provide something more comprehensive than what your C-suite can assemble on their own. For example, when you pair financial coaching with advice from a tax and legal advisor about deferred compensation, you’re not just explaining how deferring works, you are also offering tailored advice about how to navigate the potential trade-off of paying less tax now with deferring income until retirement.

  2. Create multichannel, flexible programming

    Executives are pulled in many directions and may not be planning as well as they could, simply because they are short on time. Having financial wellness programming available on demand in a variety of mediums, from digital to in-person, is key. It’s also imperative that executives have access to experienced Financial Advisors familiar with your company's offering, versus Financial Advisors who can only speak about things in general terms. 

  3. Look beyond the company retirement match

    Companies can’t match 401(k) contributions on income that exceeds $285,000, Conlon points out. “So for your 7-figure executives, they only get matched on a relatively small amount of income. That’s why companies need to take advantage of nonqualified deferred compensation plans and equity compensation programs.” This is an area where good plan design that is specifically focused on what executives need can help retain top talent.

  4. Seek out strategic counsel around equity compensation

    “It’s so important that executives read their plan and understand how much of their equity compensation can be part of their deferred compensation,” Crosby says. “There are so many rules and regulations around when you can make those deferral decisions. Plan sponsors should work with a Financial Advisor who really understands the ins and outs of equity compensation, and how to interpret those documents to understand the nuances.” For many executives, equity compensation is an integral part of when they can retire, often allowing executives to retire before retirement age, when they can draw down on their 401(k) and apply for Social Security.

Final Thoughts

Working with a Financial Advisor who can offer uniquely segmented approaches across retirement, financial wellness and equity compensation plans can mean happier, more productive executives. It also creates a robust, flexible benefits program that can help both your organization and your employees thrive. 

 

Morgan Stanley at Work meets companies and individuals wherever they are on their journeys of wealth creation. With an end-to-end approach to workplace financial solutions, we provide a unique combination of thoughtful education, insightful advice and leading technology.

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Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates, and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice, are not “fiduciaries” (under the Investment Advisers Act of 1940, ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein, except as otherwise provided in writing by Morgan Stanley and/or as described at www.morganstanley.com/disclosures/dol. Individuals are encouraged to consult their tax or legal advisors (a) before establishing a retirement plan or account, and (b) regarding any potential tax, ERISA and related consequences of any investments made under such plan or account, and (c) to understand the tax and legal consequences of any actions, including implementation of any estate planning strategies, or investments described herein. 

 

CRC# 6077730 (11/2023)

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