Introduction
Retail investor relations is an area of IR often overlooked in studies. The average proportion of shares held in a company by retail investors is a little over 14 percent, compared with an average of more than 58 percent held by institutional investors. Given this, it is understandable that the primary focus of IR is on investment professionals rather than individual investors. As this report shows, however, the importance of retail investment goes beyond the capital it provides.
This report investigates current levels of retail investment, how these have changed in recent times and how satisfied IROs are with these investment levels. The report also looks at how best to communicate with retail investors, how their queries often differ from institutional investors and what benefits and challenges IR professionals associate with retail investors.
This report is based on research from the Global IR Survey conducted in Q1 2021. Data in this report is broken down geographically and by company market capitalization. For the purposes of this report, market cap is defined as follows:
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SMALL CAP
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<$1BN |
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MID-CAP
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$1BN - $5BN
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LARGE CAP
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$5BN - $30BN
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MEGA-CAP
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>$30BN
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Three ways to increase retail shareholder engagement in a digital world
Broadridge advertisement feature
Three ways to increase retail shareholder engagement in a digital world
New brokerage models continue to create more retail shareholders than ever. In the past 12 months, a third of companies have seen an increase in retail investors, and more than 25 percent have seen an increase in the past three years.
Many of these new shareholders are comparatively younger – usually millennials, but some Gen-Zers – buying positions on digital platforms and mobile apps that make investing easier and faster. At the same time, social media-driven meme stocks combined with the related public fervor indicate a new set of expectations.
So what does retail engagement require in this context? And how can investor relations professionals make the most of this wave of retail investor activity? Here are three strategies to meet retail investors where they are, on their terms.
#1 Think digital
To better connect with investors and facilitate shareholder engagement, more issuers are leveraging technology and turning to digital platforms. In 2020, a
record 97 percent of the voted shares were cast electronically. More than 3 mn retail positions were voted on mobile devices (up from 2.7 mn the previous year).
There are several digital tools making it easier for investors to participate. Issuers are increasingly turning to design to enhance their paper proxies, which enables them to deliver key messages in a more impactful way; incorporating QR codes in the design then eases the print-to-digital transition for voting. Shareholders can quickly navigate from their paper documents to the dedicated Broadridge ProxyVote website or mobile app. Meanwhile, Broadridge is further simplifying the experience, offering one-click access to vote from their broker’s website, broker mobile app or the ProxyVote app.
In addition, some issuers complement paper proxies with Broadridge’s unique interactive digital proxy experiences. These dedicated microsites enable companies to tell their story with embedded videos and graphics, data visualization and more.
According to the IR Magazine Global IR Survey, one in four companies would like to see a higher proportion of shares held by retail investors. Digital proxy experiences are a great way to potentially increase those numbers.
#2 Keep your annual meeting virtual
Because of pandemic disruption last year, issuers scrambled to move their annual shareholder meeting to a digital/virtual environment. The Broadridge platform hosted nearly 100,000 people, attending 1,957 virtual meetings.
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1 Global IR Survey 2021
Virtual shareholder meetings (VSMs) are far more convenient than in-person events. Shareholders don’t have to travel, and attendance feels much like a typical Zoom meeting. It’s no surprise that the Global IR Survey found that the adoption of VSMs translated into greater retail shareholder engagement.
Broadridge’s own data confirms the same. Compared with the previous year, the rise in VSM use in 2020 translated into more attendance per meeting, more question submissions and more voting. Even comparing same-year data, average voting participation at companies that utilized a VSM was 71 percent, exceeding participation at companies that did not use a VSM (63.6 percent).
#3 Be ESG ready
Morningstar reports that net flows into ESG funds reached $51 bn in 2020, which was twice the total for 2019 and nearly 10 times more than in 2018. And, according to the latest Broadridge data, shareholder support for social and environmental proposals increased slightly from 25 percent in 2019 to 27 percent in 2020. Although much of the activity is due to support from institutional owners (up from 26 percent in 2019 to 29 percent in 2020), it may be a mistake to ignore retail investors in this context.
As issuers find their ESG voice and adopt new frameworks for transparency and disclosure, they’ll need to keep retail investors in focus. ESG storytelling creates occasion to connect with retail shareholders, especially when sharing your ESG successes through consumer-centric channels. Targeted ads, social media, even – in some cases – SMS all offer new opportunities to convey your company’s values and value. Effective ESG storytelling can be compelling in a way that positively impacts brand perception and promotes shareholder loyalty.
Digital makes the difference
In 2021 it should come as no surprise that your digital strategy matters more than ever. Be ready with Broadridge.
Broadridge’s digital proxy expertise and experiences, VSM technologies and ESG advisory solutions anchor a foundation to transform retail shareholder engagement. Combined with Broadridge’s massive network of data and communications, you’ll create the experiences shareholders want to drive the outcomes you need.
1 IR Magazine Global IR Survey 2021
