Engaged is Empowered

Engaged is Empowered Workshop 

Dinesh Patel:    All right.  Welcome everyone to the Engaged is Empowered Workshop.  Today we'll be discussing the state of the workplace in addition to making the most of the benefits and support for your employees in the face of unpredictability.  Just a little bit of housekeeping.  We will respond to questions entered through the platform individually after this workshop.  By way of introduction, my name is Dinesh Patel and I've been with the firm for 17 years, and I'm currently the head of the Global Private Markets Onboarding Team.  I'll turn it over to my friend Monika here to introduce herself as well. 

Monika Endrizzi:      Perfect.  Hi, everyone.  My name is Monika Endrizzi.  I've been with the firm for going on nine years this summer but been focused on participant engagement and supporting employees through their financial journey for most of those years.  So it's been really exciting and excited to talk about the subject today. 

Dinesh Patel:    Great.  Maybe before we begin, where I'd like to start talking a little bit about the workplace itself and quoting the Morgan Stanley at Work's most recent State of the Workplace study*.  I think there's a lot of great findings coming out of that study, and it helped to quantify the workplace as we see it and get that feedback from not only company but also individual employees.  One of the interesting findings that came out of that was with regards to 84% of employees wanting their employers to be more involved with helping them through their financial challenges. 

Having said that, nearly as many HR leaders said that they are unable to assist in meeting those financial challenges for their employees.  So it creates an interesting dichotomy in the workplace of employees needing that benefit or looking for that benefit and employers not feeling empowered to do so.  There was also a general agreement from HR leaders, 87%, in fact, believing that employees will leave their firms without this support being there.  

*https://www.morganstanley.com/atwork/articles/workplace-financial-benefits-strategies 

So definitely having a contributory effect to overall attrition rates within their organization.  And if anything, the past few years, tumultuous years have taught us is also the importance of physical and mental being.   

And within the study itself, 71% of employees reported feeling financially stressed or financial stress negatively impacting their work and personal life.  Conversely, there was also a testament from the HR leaders 84% of them worried that these financial issues that their employees are facing are also impacting their work productivity.  So there was a general collective agreement in regards to how this contributes to the overall well-being and holistic view that employers are trying to take for their employees. 

 So one of the things that I think has always been widely appreciated and known is with regards to equity compensation playing a strong role in helping to support employees and promoting multiple factors from motivation to engagement to loyalty within the organization, and also providing a long-term investment strategy for the employee.  So you pair the equity compensation with the state of the workplace study and then you put it all together with the current market volatility that we've been seeing in addition to the high inflation rate and you've got the makings of this epic storm that we're encountering. 

 And so I'm excited to be with Monika today to talk a little bit about some of the strategies being offered by Morgan Stanley at Work to help our employees and employers navigate through the storm.  So it's one thing for, I think, the employer to build the door of financial wellness, but it's another to have your employees actually understand how to walk through it.  And so Monika, I thought where we'd start this discussion is using a real-world example and having an employee or talking about an employee's journey through their life and career and how the employer and Morgan Stanley at Work can partner to help support them through their life journey. 

Monika Endrizzi:      Yeah.  When you think about engagement and putting together how to really empower your employees to understand their equity and understand their financial goals, you really have to break it down to where someone is in their life and their journey.  You can't just look at your company collectively and say, we're going to do an education session, and at the end of that, everyone will know what happened.  You have to also think about who's going to be attending that education session and what will they be getting out of it. 

So when I start from the beginning when you're fresh out of college – it's been a while, but I remember it like it was yesterday that your pay is lower, rents are higher, especially right now.  Rents are at an all-time high.  You're coming out of college, you probably have student loan debt.  You're figuring out how to pay bills, most likely, for the first time ever.  You have electricity, you have your car payment.  I know my parents politely handed over the car payment and the insurance payment as soon as I got my first job. 

And so you have to start figuring out how to balance all those and you want to have fun.  But then you're – I remember I would go to work and they'd be like, what are you contributing to your 401(k)?  And I'm like, well, how can I?  Where's all the money?  And I think when looking back and how we can really help companies and how companies can help their employees is like, it can truly be $25 a month that goes into your 401(K).  What it's really about when you're fresh out of college is building those practices that will be something that you then stick with throughout life.  And so even if it's $25 now going into your 401(K), you're building that practice that as you age and as your income gets higher, you're able to then actually contribute more year over year. 

Dinesh Patel:    Yeah, that's a great point, Monika.  I think one of the things we were discussing this topic that kept coming up is it really comes down to the foundation, the basic principles of financial wellness and retirement savings.  Those time-tested strategies that are even more important today in the face of all of this volatility that we see and uncertainty we see in the market.  I think those are definitely standing the test of time and provide the best long-term benefit. 

Monika Endrizzi:      Agreed.  Even if you look at the market, just going back two, three years, if someone was in college at any point in the past three years, you were seeing that.  And I don't know if it was just because I have been in the financial markets for my whole life or not, but I feel like the stock market became much more popular amongst conversations and trended more.  And so I think a big philosophy or a thought process was that it always goes up into the right, that the stock market always goes up and you're seeing huge valuations of these companies.   

And so I guess if looking back at it two years ago or three years ago, you're thinking that you're sitting right and that there's nothing but success and nothing but growth and there's still growth.  There's still absolutely growth.  But fresh out of college now, seeing that the market's changing, hearing now nothing but talk about inflation and seeing maybe companies raising money, having more space in between when they're raising money.  There's also been talk about restructuring or reduction in force.  That brings up all new fears.   

And so if you were fresh out of college in your early 20s or 30s, those bring in practices and the foundations that we were mentioning of like making sure that you have that emergency fund and so making sure that you're thinking, do I have enough money to survive the next month or two?  And then as you get older or have more responsibilities, if you have a mortgage, thinking through how you'll then support those finances if something were to happen.  But I would say overall it's been an interesting roller coaster the past few years, but being prepared is probably the best way to then set yourself up for a great financial future. 

Dinesh Patel:    Yeah, as they always say, I think the two main takeaways there at this stage in someone's life is get started and time is your friend.  So get started now.  So let's fast forward a little bit.  The individual graduates from college, maybe they're in their late 20s, maybe early 30s, and so they're getting to start to be a little bit more financial comfortable.  Let's hope they've taken our advice and have put some foundational elements in place.  What else should they be looking at at this stage in their lives and careers, Monika? 

Monika Endrizzi:      Yeah.  I feel like now is the time that you start then doing a little bit of your own investing.  Hopefully, your 401(K) has been established.  Of course, not all companies offer 401(k).  But then are you investing in other ways?  And so I would say this is when you can then start expanding your investment horizons and looking at something that's not commonly talked about or maybe not broadly known is that part of Morgan Stanley at Work is E-Trade.  And so the ability to allow your employees in to open up E-Trade accounts through their Shareworks account where they have access to equity.   

I think those two then start naturally having a really great connection where an employee can really start thinking through how their equity is then factoring into their financial future and then how that E-Trade account can then help them expand their investing goals.  And how their equity from the private company plays into the equity that they're building by either investing in ETFs or individual stocks in their E-Trade accounts. 

Dinesh Patel:    Yeah, I completely agree.  I think one of the challenges that I had early on is the complexity of all the different systems and tools and so forth.  And so the integration and the ability to see a complete picture, a complete financial picture, I think is a huge advantage.  And it makes you – it gives you all the information to make the right decision and better decisions. 

Monika Endrizzi:      Yeah, absolutely.  It's nice when you can actually see what your equity is as well as your stock portfolio.  And I think that – especially someone at that age and thinking from a company's perspective, someone in their 20s and 30s, a lot of it's been around intimidation.  You kind of now know what you need to be doing.  You know the right things to be doing or budgeting or things like that.  But it's really how do I take that next action step.  And so having the access into Morgan Stanley, working with your relationship manager I would say those are huge benefits to them being able to set up education.   

 And so there are education sessions that we offer where it's investing 101 or attending webinar Wednesdays, which we offer three Wednesdays a month.  And so participants are able to then register for sessions that are interesting to them.  One of them is market outlook.  So we offer that on a quarterly basis.  And then there's sessions that are topical either to the month or topical about investing.  And so that really helps you or budgeting or gifting all of those things then are what's most important to that individual and then how they can then execute. 

Dinesh Patel:    That's great, Monika.  So if I was to summarize, would it be fair to say that at this stage in someone's life, they're looking to now get a little bit more serious about their financial wellness and their strategy.  And actually, get more strategic about it, consolidating that strategy into maybe a single platform or a single source so that they get a comprehensive view to make the best decisions.  And it's really about, I would say, continuing the momentum that they had built early in their college careers.  Hopefully, like I said, with those foundational elements, it's really riding that momentum and making sure that they're carrying it forward as their careers grow, their incomes grow, that sort of thing. 

Monika Endrizzi:      Yeah, absolutely.  And it's really going back to the basics and making sure that those fundamentals are in place.  It's never too late to catch up, but it's always nice to start early. 

Dinesh Patel:    Absolutely.  So let's ride that momentum wave.  Let's take it to the next stage of that individual's life.  So maybe they're in their mid-30s-ish and their goals are becoming a little bit more clear in terms of what's happening in their personal lives as well as what's happening with their careers.  So there could be things such as buying a new home they're probably getting into.  They may have kids that have come along the way in that life's journey, and so they've got kids education to think about.  They'd like to take a nice vacation, so they want to have a long trip.  So there's all these things that are happening at this stage in their lives.  Can you elaborate a little bit more on what they can do at this stage? 

Monika Endrizzi:      Yeah.  I think that this stage of someone's life is really interesting because now you can afford all the things that you've wanted to do.  But then being smart about how you're spending your money and thinking through long-term goals versus short-term gains.  You should always treat yourself but keep in mind, like, would it be – does upgrading to first class really fit into my long-term financial goal, or should I stay in the economy for now, knowing that if I invest that money in the future, that first class ticket will be there for retirement?   

And so really kind of starting to think through those strategies of how you want to spend your money, where you want your money to go, and then your life is most likely more complicated now.  You may have been married or thinking about getting married.  You may have kids, you may have kids going to private school or thinking about going to college.  And so how are you going to pay for all those new expenses or new things?  You may have bought a house, planning then for how you're going to cover unexpected leaks or whatever comes your way.  Those are all things – 

Dinesh Patel:    The rainy-day fund. 

Monika Endrizzi:      That emergency fund needs to get a little bigger.  And then you also have other people to think about and most likely your – or your parents.  It's a big thing now like parents are starting to – your parents are starting to age.  They might need either financial help or medical help or you're thinking long-term, how will I be able to help them as well as then support my kids as they continue to grow too?  And so I think this is where we typically then see people really wanting to have conversations with financial advisors.   

Before this stage, a lot of conversations with financial advisors center around, am I doing the right thing.  It's like a check-in, am I going to reach my goals or am I accomplishing what I need to be accomplishing right now, am I meeting that benchmark?  At this stage now, if you're married or in a relationship, have kids, you're then having to think about it's not just am I accomplishing these goals, but am I going to accomplish the goals that are five, ten years away as well as then achieve my 30-year goals of retirement or whatever it is you want to do.  So it gets a little more complicated, which is where I think that the conversations with financial advisors become a lot more fruitful.   

 Your employees have probably also worked somewhere else in that time as well.  So there might be previous 401(k) plans, there might be previous investment accounts that have been opened, other stock plan accounts, maybe they worked for a public company and still have stock in that company or they've worked for a private company.  So now there's some complexities, where it's not just a clear-cut this is what I have.  Now you need to start piecing together other areas from your life.  And so that's where an advisor really can also add that extra value of helping you understand what all of your holdings and your past decisions are going to help you achieve in the future. 

Dinesh Patel:    Yeah, I completely agree.  And I think at this stage, the decisions that you make are on sort of a larger scale because you have that equity that's been built up, you have probably more options available to you from a financial wellness perspective.  And so it kind of comes back to the old adage about like time is a limited resource and you don't want to sweat the small stuff.  And so do you really want to worry about having that or saving the money on that latte a day?  Or do you take that time and energy and focus on are you appropriately contributing into your 401(K) and making those longer, larger decisions correctly?  Not worrying about the little things that you may have been considering earlier on in your life. 

Monika Endrizzi:      Yeah.  When you're younger, it was, can I afford to go to this concert or I have a girls' trip or maybe it's a friend's getting married.  And so it was a one-time expense and it was probably a lot of money.  I remember it feeling like a lot of money to me but now it's on a larger scale and there's more impact.  And not to stress anyone out but you're also then getting closer to the timelines getting shorter, I suppose, to retirement.  So there's those new factors that come into play. 

Dinesh Patel:    And all the more reason to get that professional advice and professional support.  And so having your employers provide that type of information, those opportunities.  And once again, Morgan Stanley at Work coming to the table with a more comprehensive and complete solution to help you make those larger impactful, I love that word, impactful decisions. 

Monika Endrizzi:      Yeah.  And we've seen companies come to us for this, which is great.  We have a company that it was actually their parents' group that's interested in having an education session.  They want to learn more about 529 plans and investing for their kids and planning for college.  And so it doesn't have to be your whole company attending an event.  It can be different groups or different areas that you think would be helpful so that they can get the information that's most on top of their mind.   

And really by being able to provide that kind of information, you're helping settle lots of nerves.  Now that parents' group that maybe has 100 people in it, those 100 individuals don't need to go off on their own course and figure it out outside of work hours.  You're bringing it to them and creating a package.  So you're saving not only all of them individually a ton of time, you're then providing that extra resource and that extra benefit that really then creates some stickiness amongst your employees. 

Dinesh Patel:    Yeah, 100%.  So if we move over to the next stage after that, we are now most definitely thinking about retirement.  You've put in a long, hard, productive career with your employer and so you're looking to take that extended vacation, as they call it.  So at this stage in your career, when that sort of end of your career, the retirement is on the horizon, what are some of the things that an employee and employer should be considering? 

Monika Endrizzi:      Yeah, I think like again, just being able to bring in the like, financial advisor and having kind of similar to that parent session, now having a bit more focus what's retirement look like to you?  What are things that you need to think about that maybe you weren't thinking about?  I was talking to someone that was planning – they were actually planning, aiming to retire early in their 50s, like early 50s.  And then they had the thought process of shoot, I also have to figure out what am I going to do for health insurance?  Because that kicks in at a certain age, in that gap how do you come up with it.  Did you plan for enough money in between those times?   

 And so making sure that your one, having those focused conversations and bringing those educational opportunities to your employees, as well as then making sure that the services that you're working with, with your relationship manager and the advisor that's connected to your account is really starting to understand your employee demographics.  So that they can make sure that they're bringing relevant topics as well. 

So if you're planning on retirement, what do they also want their life to look like?  And those are all things that they can talk about with an advisor.  Do they want to live in the US or do they want to live abroad?  Do they want to retire to a different state or do they want to stay in the same house?  They may still have to be paying for kids' schools or something else.  So having someone that has the experience of that, I think that's where it's beyond invaluable and making sure that you're thinking through that. 

Dinesh Patel:    Yeah, I think that's a great point.  In terms of cost of living, everyone has their own relative perspective on what that means for them and what is ultimately going to be to their satisfaction.  And so I think having that input and taking that into consideration in the planning is super important.  I would also like to hope and think that individuals are obviously wanting to not have to think about all of the financial wellness and financial planning and budgeting and all that sort of thing when they go into retirement and just know that they're financially secure.  And so almost have a game plan that sort of goes into an autopilot type of mode where all of that pre-work that they've done, that momentum that they've built through their lives and careers allows them to execute on a strategy that they can just sort of set and forget and truly enjoy their retirement. 

Monika Endrizzi:      That's what we all work hard for.  And I think making sure that every step of the way that your employees are thinking through these different stages of their life and making sure that they're thinking not just one year out or present day or getting through – I have a lot of friends that talk to me about the high cost of day-care.  And they're like, well, once the kids stop going to day-care, it will get cheaper.  I haven't informed them that the sports come into play and they actually just get more expensive.  But that's okay.  I think making sure though, that you are thinking through the different expenses that are coming five, ten years away.   

And then you're right, like planning for retirement, what you want your day-to-day to look like.  Planning with someone, how much that will actually cost not just what you wrote on the back of a napkin.  I always like the numbers that I write on the back of the napkin of like, I think this is how much money I need.  But then when someone actually takes you through it and they're like, well, actually, you forgot about this expense.  And don't forget about these and X, Y, Z and plan for inflation, the magic word this year.  Then how can you – going through all of those motions, really actually creates a much more confident employee because they actually know the real number that they need to strive for to achieve the life that they want.   

Dinesh Patel:    Yeah.  Completely agree.   

Monika Endrizzi:      I was going to say, I think that there is one group that – we talk through broad-based employees and maybe how their life experience would be and at each stage.  One thing that I didn't mention is since we work with private companies, is thinking through like founders and executives at these private companies.  And as these companies mature, thinking through what their needs are, what their focuses are.  I can imagine as a founder you would be very attached to your company.  And you're also probably pretty heads down on focusing on the next creating success for not only yourself but now you also have an entire employee base. 

And so making sure that you're thinking through how you're supporting your founders and your executives, that they're getting this carved out time to think through their financial goals as well is really key.  Making sure that they know who to talk to, who they can go to as resources is, I think, beyond important.  Because a lot of times you can start doing the planning a lot earlier, which if your company does decide to go IPO or an M&A transaction or do a tender offer, there's strategies that someone that founded a company or was more senior, been at the company for a long time and seen the company for all the growth, they can start planning so much earlier about how they want that equity to be treated.  And ultimately, that has a huge factor in what their long-term success and long-term financial goals will help them achieve.   

So that's one thing that I did want to highlight because I think that's such a key piece that maybe is kind of known in the back of our head.  But I think it's also always kind of an assumption that could be happening that they're taken care of, but they maybe aren't thinking about it early enough.  And so making sure that it's on their radar and that they're thinking about their five, ten-year plan as well as retirement plan.  Not just getting through this week and next week and getting through the next fundraising, but thinking through their financial goals as well, I think is a big one. 

A tool that I really like that Morgan Stanley has is a tool called Equity Award Analysis.  And so that's something that a financial advisor would be able to then take a founder, executive, late stage, someone who maybe has multiple equity grants or more complicated equity structure.   

Dinesh Patel:    Yeah, that's a really great point, Monika.  And I think a really nice segue way.  We talked a little bit or a lot about the employee experience and the individual in their life.  And I love how you pivoted to the employer and what they can do and then more specifically, even a private company because as we know, there are going to be nuances and differences between a publicly traded company on a public exchange versus what a private company can do in terms of providing financial wellness to their employees.  And so I think you mentioned a couple of great topics in there in terms of you mentioned IPOs.  You mentioned M&A.  You mentioned tender offers.  Can you expand on that a little bit more and talk about the tools within Morgan Stanley at Work and how those kind of solutions are integrated together and how we can benefit the employer? 

Monika Endrizzi:      Yeah.  One other one that's become much more popular amongst later stage private companies has also been RSU releases.  So moving from a double trigger to a single trigger RSU, which then does have a financial impact and tax impacts on private participants.  And so there's a team within Morgan Stanley at Work, which companies can work with that focuses on being transaction ready.  So making sure your company is ready from a demographic standpoint, from awards cleanliness, thinking through all of those things, but then can also really work with you on what kind of education events do we need to be doing. 

We had a client that moved from double trigger to single trigger RSU.  Educating your employees that there's going to be tax benefits at every – sorry, not tax benefit.  There's going to be a tax impact and obligation for your employees now at every vesting and what that means because for the majority of private companies, ISOs, non-quals best things are happening.  But with no liquidity, there's very little for someone to be able to do with those best things they could do if the company allows for early exercise, or they could just be doing exercising on those vestings and exercising hold should say.  But now our RSUs if they're single trigger, that's a tax obligation.  If you do a tender offer that's also your employees are allowed to sell their stock if they're doing exercise and sell or sell some stock that they've already have a common stock in. 

Those are all tax obligations now as well that they need to be factoring into their financial picture.  Same with M&A and IPO.  I've personally lived through an M&A and I remember, I messaged my accountant, and my – luckily, I have an accountant and financial advisor who was like, we got acquired, this is great.  And then he was like, okay, we'll start planning for your taxes and what this will mean for you.  And I'm very lucky that I had that opportunity to start thinking about it as soon as the deal was announced. 

 And so making sure that your employees then also have that kind of luxury that I was able to have of, oh wow, this is great and this is exciting, but this is also something new that maybe they've never lived through before.  So planning education is key.  Getting involved with your relationship manager, bringing in the financial advisor, and really strategizing with them.  Do we need to do a road show?  Should we do on-site?  Should we do virtual?  How many sessions do we need to have?  What times of day do they need to be?  What are the topics and should we bring in anyone else to support that subject matter? 

And so I think all of those we do offer education sessions for tenders, IPOs after you've gone public.  I always love the name of the session.  It's called your public, now what?  Because it's a whole new world.  Now you have liquidity whenever you're not in a blackout, which is pretty much the opposite of how a private participant's been at their career of a private company. 

 So really, thinking through those and then utilizing Morgan Stanley at Work, utilizing your relationship manager, utilizing the financial advisor that's associated with your company.  Really using them for their expertise, past experience supply that benchmarking, and what sessions you should be offering and who to?  Come to them with your problems, come to them with your stresses and then they can help you start problem solving.  How to address your different populations, how to address your upcoming events so that we can get ahead of it and avoid any kind of confusion or long-term mistakes that might happen. 

Dinesh Patel:    Great.  Yeah, it's really covering the full gamut of offering from the broad-based, wide-range programs itself all the way down to the specifics of a financial advisor and a customized plan.  So it's everything in between. 

Monika Endrizzi:      Yeah, and it's everything in between.  And I think that that part is great.  There's some companies that then also choose to have office hours and so they'll do like quarterly office hours where it will be their equity team there or making sure that you're also – as a company that you're then also bringing in the other groups within your company.  This all doesn't have to land on the stock plan admin shoulders.   

Bring in your HR, bring in your benefits, bring in your finance team, bring in all these other areas of your company so that we can help you bring in your retirement team like making sure that everyone's been connected.  And so then not only you're getting the help that you needed, but now your employees are getting a consistent experience as well.  They're hearing the same thing over and over.  They're hearing a consistent message and really ringing true to what's important to your company and your company's values. 

Dinesh Patel:    That's fantastic.  Yeah, that's really great advice.  And I think that's all that we have time for.  So I just wanted to thank you for your time, Monika, and I wanted to thank everyone for giving us the opportunity to have this conversation and share some advice.  And we look forward to helping achieve your goals through Morgan Stanley at Work. 

Monika Endrizzi:      Yeah.  Thank you so much. 

This material has been prepared for informational purposes only. It does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley Smith Barney LLC (“Morgan Stanley”) recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a Morgan Stanley Financial Advisor. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. 

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for legal matters. 

Morgan Stanley at Work services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley. 

© 2023 Morgan Stanley Smith Barney LLC. Member SIPC. 

CRC#5687912  (05/2023)