By Dean Little, CEO and co-founder of Proxymity
The needs of retail investors have always been defined in simple terms: to see a return on investment (ROI). This fundamental desire for ROI will remain evergreen. It is also correct to acknowledge that the needs of retail investors, whose numbers have swollen post-pandemic, are now multi-faceted and necessitate a proactive, transparent and real-time digital investor communications strategy.
The reasons behind this shift in the demands of retail investors are plentiful. The democratization of investing through digital platforms has made the stock market more accessible, with new retail investors often wanting to align their investments with their values. For example, retail investors show higher trading activity levels on the announcement of ESG news regarding their respective stocks.
Similarly, the rise of online investor communities has fostered a more informed and connected retail shareholder network, with a desire for more significant influence over corporate decisions. This new breed of retail investor, with 15 percent of all current US stock market investors having first begun investing in 2020, relies more heavily on digital communications, and many depend solely on digital platforms for investment information.
In a world of pre-digital transformation, retail shareholders often spoke of feeling overlooked. This was attributed to the high costs associated with engaging them, though another significant reason was the lack of high-quality digital communications channels through which shareholders and companies could connect. But access to transparent, real-time and accurate digital communication tools has revolutionized the IR landscape, enabling retail investors to actively participate in decision-making processes, including proxy voting.
The needs and wants of the modern retail investorRetail investors, buoyed by easy access to information and trading platforms, have become increasingly savvy and discerning. They seek transparency, with some prioritizing ethical practices and sustainable growth, often aligning their investments with ESG principles, while others are more traditional in attempting to keep companies focused on their core mission of delivering profits to shareholders.
These investors desire a deeper connection with the companies they invest in, valuing open dialogue about long-term strategies, ESG initiatives and how these aspects intertwine with financial performance. Their informed stance propels them toward companies that are not merely chasing short-term profits but are invested in creating a sustainable, ethical and socially responsible footprint.
Yet, traditionally, the influence retail investors have had on voting rights for assets held within collective investment vehicles has been limited. They can, at times, communicate some of their major social, environmental and governance concerns to the fund manager, while still lacking a direct portal to management through which to express their feedback. This can leave retail investors frustrated as they are unable to vote or influence corporate governance in those companies.
According to BlackRock: ‘While many asset owners are pleased to have stewardship teams serve as a bridge between them and the companies they are invested in, others want the choice to actively participate in proxy voting.’
The benefit of bringing retail investors into the foldLong-term relationships with retail investors can yield substantial dividends. A loyal investor base can provide a level of financial stability and resilience, particularly in turbulent market conditions, and their continued support can also foster a positive reputation in the broader market, attracting further investment.
Moreover, a committed retail investor base can become a staunch advocate for the company, its vision, brand, values and sustainability initiatives, creating a community of ambassadors that extends the company’s narrative beyond traditional boundaries. Once engaged in a deeper way, these shareholders are more likely to view themselves as owners, have trust in the brand, potentially deepen their ties as customers and hold on to their ownership for longer.
The multiplicity of communication channels available today – from social media to webinars, podcasts and direct email campaigns – has empowered companies to interact with retail investors in a more personalized and engaging manner.
This extends to the way companies interact with retail investors on matters such as proxy voting, with many organizations now recognizing the need for a transformation in investor communication.
One such example is BlackRock, the world’s largest asset manager, with which we have recently partnered to roll out our Proxymity Vote Impact service, powered by Proxymity’s investor communications platform. BlackRock’s Voting Choice program will be rolled out to investors in ‘select UK mutual funds’ and allow investors in certain funds to vote on motions at investee companies.
The service includes issuer ‘golden source’ meeting announcements published directly from issuers to investors. As part of the process, Proxymity will ask a broker or investment platform to identify how many units an interested investor has in a relevant fund, and then create a user profile that enables the individual to cast his or her votes.
In what is a watershed moment for retail investors, the partnership exemplifies how digital solutions can revolutionize investor relations and empower retail investors.
Likewise, retail intermediaries can leverage Vote Impact to enhance their product offering and attract and engage increasingly active retail investors quickly and simply by providing their retail clients access to their shareholder rights, enabling them to be seen and heard on the important issues that matter to them.
Proxymity enables investor communications professionals and the institutions they work for to engage and better serve retail investors by allowing them to exercise voting influence on key issues. By embracing digital platforms and focusing on enhancing engagement with retail investors, companies can not only improve their governance but also foster more meaningful and lasting relationships with their shareholders at a time when the influence of retail investors continues to grow.
