Educating New Retail Investors Will Improve Shareholder Engagement

To say that COVID-19 has accelerated industry change is close to becoming a cliché. The remarkable boom in retail investing over recent months joins remote working and online shopping as trends attributed to the pandemic-induced lockdown and its effects on spare cash, stimulus checks and boredom.

These factors may be short-lived, but they amplify deeper trends driving growth in retail investing: shrinking trading fees, the proliferation of trading apps, the influence of social media, plus a global equity rally. Meager interest rates and unattainable house prices are also adding to the conviction, especially among younger generations, that trading offers faster upside.

Novice Investors Deepen the Need for Education

Against this shift stand concerns that novice investors lack the understanding and tools to be successful over the long term.

Herein lies an opportunity for brokers and issuers. First-time traders need education about what it means to be a shareholder – the rewards, risks and responsibilities. With so much to learn, it can be overwhelming, but issuers and brokers have the ability and standing to educate younger and newer investors and help them make good choices.

Investor communications may be a fiduciary duty, but an opportunity exists to go further. The latest investor communications technology provides a platform that facilitates shareholder engagement. Making a proactive commitment to education will enable the investment industry to benefit from an informed group of stakeholders.

Shareholder Engagement is Good Business

Addressing lack of experience and knowledge makes good business sense. Issuers benefit from having a more supportive and stable shareholder base. Brokers can build brand reputation and create sticky relationships with shareholders.

Issuers that only call on shareholders when a problem arises are more likely to experience a wary audience that is unsupportive of management positions. Those that invest in regular communication will earn shareholder trust and be in a better position to win support, especially for more complex or controversial proposals. Ongoing interaction throughout the year also helps reveal the direction of proxy voting, signs of shareholder activism, and views on sensitive matters such as executive pay, ethics and the environment.

For brokers, efforts to educate retail traders add value to the customer experience and will help to attract and retain new business. Apps can be designed to make tutoring part of the trading process. Efforts to highlight risk or instill long-term investing strategies will help guide new investors to get the most out of their investments.

A Toolbox for Shareholder Engagement

Shareholder engagement programs can seem daunting to organize. For example, new shareholders can receive as many as 100 different documents after buying a security. Mediant offers a host of tools and expert advisory for optimizing the entire investor communications lifecycle, turning otherwise burdensome communications into opportunities to enhance customer experience and drive business growth.

Brokers use Mediant’s multi-audience, multichannel MIC platform for managing and taking action on real-time investor communications. Adopting a centralized approach coordinates and empowers investors, advisors and operations.

Issuers are seeing increased engagement by transitioning to digital communications formats, including email, mobile apps and text message. As a result of the pandemic and its restrictions, many have also experienced the advantages of virtual shareholder meetings (VSMs), with higher levels of attendance and proxy voting.

While technology makes investor communications easier to manage, audience focus and a little creativity can lift the appeal and effectiveness of the program content. For example, offering content aligned to the needs and interests of new investors, perhaps using formats such as podcasts or videos, will draw in those who may be turned off by more traditional written documents.

Investing in the market can be one of the best ways to build wealth over a lifetime. The ease and flexibility of digital and app-based trading aids inclusion and is therefore to be welcomed, but issuers and brokers need to understand that a new, inexperienced influx of investors will have different needs and expectations. Efforts to educate and build shareholder engagement will help ensure a positive experience for the majority.

For more information, contact us.