For public companies around the world, retail investors are becoming a more important part of the big picture. If IR teams want to carry their sustained interest, they’ll first need to learn how to speak their language.
Retail investors are growing into a sizeable and essential bloc for public corporations. While they’re a consistently under-courted demographic (especially when compared to institutional players) retail investors are proving to be increasingly loyal, vocal assets to a shareholder base.
In an era of volatile global markets and increasingly austere government social programs, retail investors are thinking longer-term in their investment choices — retirement savings is by far the top investor goal, according to Natixis research. This trend will drive investors to hold their shares for longer periods and avoid impulsive, short-term behavior, argues MFS.
This is a win-win for publicly-listed companies, who stand to gain a stabler, more loyal retail investor bloc. However, IR teams are most familiar with the wants and needs of institutional investors, who hold comparatively outsized influence. To grow and retain their base of retail investors, it’s absolutely critical that IROs learn to curry their favor.
Communicating Simply and Openly
Retail investors need to be given simple, forward-looking, and frequent dispatches about what a company is going to do, and why they should take action to invest (or continue to invest) in it. Unlike institutional stakeholders, who often have their own analysts, individual investors usually lack detailed information about the companies in which they’ve invested, a gap that undermines the confidence in their stake.
IR teams need to create retail-specific content, paying close attention to the interests of their audience. They are more likely to want to hear about share prices and dividend payments, and less about institutional concerns like board placements and voting issues.
As always, personal relationships matter. While IROs needn’t track down every individual investor, they should make regular contact with as many of their representatives brokers and high-net worth individuals as possible. As IR Magazine notes, it’s a good idea to invite brokers to presentations from the C-suite; you’ll gain their trust, and they’ll refer more investors to you. By the same token, try to frequently attend retail investor events and gain direct feedback from potential shareholders.
Engagement on Their Terms
The bigger IR teams and the IR consultancies need to enlist a dedicated retail investor representative who can supply that group with relevant information through the channels that they’re familiar with. As Andrea Wentscher, IR manager for retail investors at BASF, told IR Magazine, “Besides this special target group, the retail investor person is also responsible for online communications and social media, which, from our point of view, fits together perfectly.”
In fact, the importance of digital engagement can’t be overstated — 70% of retail investors report that social media influences their investment decisions, according to PwC. Yet, 92% of IR professionals consider social media-sourced information to be “somewhat or not at all reliable,” according to Corbin Perception. It’s imperative for IR teams to directly engage with retail stakeholders and potential investors in order to set the record straight and preserve their trust.
Mobile engagement offers one promising solution, as 51% of investors (as well as 70% of investors under 44) already use smartphones for investing purposes, according to E-Trade. In fact, the Wall Street Journal alleges that investors view investment apps in particular as, “a convenient alternative they can’t do without.”
Growing and retaining a base of loyal retail investors is certain to take some time and experimentation — the results are intended to be long-term, after all. But by simply paying attention to retail investors, you can quickly get a sense of what they’re interested in and start delivering the information they need in a package they’ll love.
(Main image credit: Johannes Jansson/Wikimedia)