We kicked off 2022 with a special blog series marking 20 years since Mediant was founded. The theme of our series – five digital trends that have combined to produce a paradigm shift in investor communications – recognizes the digital-first approach that has shaped Mediant’s innovation and solutions over two decades.
For this post, we’ve focused on two trends and their practical impact for issuers, brokers and retail shareholders. See all five trends in the introductory post.
Trend: Audiences Are Becoming Users
The interactivity of the internet, apps and social media is turning passive “audiences” who only receive information into active “users” with power to control when, how and why they engage.
Trend: Generalized to Personalized
We live in an age of choice and increasingly expect businesses to offer options for content and channels, making information more relevant and convenient.
Especially significant for the proxy industry is the accelerating adoption of these trends and how the pace of change can sometimes clash with our industry’s innate conservatism and caution.
The proxy industry has often stuck with traditional communications formats (printed and mailed documents, in-person meetings), even when technology has offered faster and cheaper alternatives. When the pandemic hit, in less than 24 months consumers moved from occasional digital transactions to doing many or most communications through the internet and apps: banking, shopping, scheduling appointments, medical care and investing.
This shift from physical to digital was already advanced among younger demographics, but the pandemic increased the pace of change and expanded it to a wider range of the population. Using digital tools became a necessity across all demographics. The outcome is a society of digital users, accustomed to communicating and carrying out tasks online.
What does this mean for issuers and brokers?
It’s tempting to split investors into segments of tech-savvy youngsters and traditionally minded veterans but creating options for personalization and interactivity is more important than attempts to categorize. Ultimately, investors prefer to self-select, and their choices offer a better guide to planning for their needs.
Although newer retail investors can behave differently, they're often more tech savvy. They decide when and how they prefer to communicate. They prefer to take advice from friends and social media, rather than industry experts. They want to hear directly from the companies they invest in, they care about values, and they are more willing to engage in shareholder activism.
Regardless of their experience, we have seen these investors move markets and create new risks for issuers. For example, look at the impact social media sites like Reddit had on the stock prices and trading volumes of GameStop and AMC. Consider how investor activism led to changes on the Exxon board.
This subset of investors cannot be ignored. According to a survey from Charles Schwab, 15 percent of current retail investors began investing in 2020 – a record year for investing. This cohort is spanning a wider age range and has longer-term investing plans.
Since consumers in general are showing an increased preference for interactive, digital ways of engaging with companies, the same goes for investors, brokers and issuers. This is why we’re seeing a paradigm shift: all investors are embracing the shift to digital, and the proxy industry has to keep up.
Practical steps to increase shareholder engagement
The response to the paradigm shift is about engaging with shareholders and expanding choices. The good news is that adaptations and enhancements that benefit industry newcomers will also be appreciated by veteran investors. Brokers can enjoy deeper relationships, issuers will gain a better sense of how investors plan to act, while shareholders will increase their sense of ownership and involvements.
Here are 4 ways to adapt to the trends and increase shareholder engagement:
- Engage shareholders throughout the year. Create year-round opportunities to ask questions, get a sense of proposed resolutions and reactions to them, and take their temperature on issues that might impact your business.
- Embrace the shift to digital shareholder meetings. Many issuers hosted a virtual shareholder meeting (VSM) during the earlier days of the pandemic, but some are making this permanent. Alternatively, to satisfy those who want the in-person experience, explore the possibility of hybrid events that combine physical and remote access.
- Enhance the shareholder experience. For annual meetings, encourage board members and executives to appear on video, use live chat, proxy voting, polls, virtual/physical breakout rooms, and expert operator assistance. For proxy materials, offer digital delivery and add interactive features to your publications.
- Meet shareholders where they are. Allow shareholders to choose how they want to receive information. Investor communications platforms make it easy to deliver documents and interactive services across multiple platforms. For those who still prefer paper documents, print-on-demand makes it quick and cost-effective to deliver tailor mailed content.
Stay tuned for the next post in the series in which we delve into another trend contributing to the paradigm shift in investor communications and offer best practice guidance on how to advance your digital transformation.For additional information, please contact us.