Retail investors, en masse, have the ability to generate the volumes and liquidity needed to move listed companies’ share price. But understanding the behaviours of such an eclectic group is challenging.
A research report released this week by the corporate regulator, the Australian Securities and Investments Commission, shed light on what retail investors consider legitimate information, and how they engage with it.
At a glance, the report showed 34 per cent of investors use Google searches as a primary source of legitimate information or research, 41 per cent use social media and 18 per cent cited company websites (or a combination of all three). The other large source of ‘legitimate information’ was word of mouth – about 36 per cent of research participants cited family and friends.
It’s been a big week:
- ChemX gives green light to HPA pilot plant
- Gold Road moves to 19.99% of De Grey
- NRW confirms MACA takeover approach
- Core provides lithium exploration update
- MinRes’ Onslow Iron project set to redefine mining in WA
- VRX announces high-grade maiden resource for Boyatup silica sand project
- As you dust off last year’s NoM, some tips for your AGM
For anyone who has answered a call from a panic-stricken retail investor, it may not come as a surprise that only about 20 per cent of participants cited the ASX platform as a legitimate source of information. A measly 12 per cent cited company financial statements, ditto for quarterly or annual reports.
Brokers and financial planners did not fare much better, with only 13 per cent of research participants seeking professional advice.
There were broad similarities among age groups, though those over 55 were more likely to access traditional forms of information.
To engage retail investors, there are a few takeaways contained in the ASIC report – and the overarching goal should be to communicate the corporate narrative in plain English.
For most mum and dad investors, technical drilling results, jargon-heavy geological reports and sophisticated financial statements may as well be written in Martian.
Social media is fast becoming the first point of call and key to reaching retail investors on their terms. It is the platform to deliver the corporate narrative and explain company announcements in easily digestible, bite-sized pieces. Engagement must be on message, consistent and, most importantly, add value – not noise.
And beware of the ‘finfluencer’.
The rise of finfluencer activity has been attributed to the explosion of new retail investors entering the market during the pandemic and a lack of quality, affordable financial advice.
ASIC makes no bones about prosecuting online influencers that provide financial advice or products without an Australian Financial Services Licence. These cases are often high profile, and can be devastating to a company’s credibility and reputation.
The company website is the second port of call and one of the most important communications tools in any company’s arsenal. Think of it as the company’s resume.
Is the website up to date? Is the information too specific? Too broad? Is the website easily navigable, is the layout functional and do all the links work? Is the design clean and the branding on point for the company’s goals and objectives?
Does the copy tell the company’s story in a way that someone with no technical or financial background can understand?
These are all questions that a retail investor Googling a company in search for a prospective investment should not have to ask.
Be consistent with selling the corporate narrative
Why invest? This is the single most important question an investor engagement strategy must answer.
The answer must be consistent – on social media, via brokers and the ASX – for all stakeholders. The art is to understand different audiences and tailor the message to suit while staying true to a cohesive and internally well-understood corporate narrative.
Retail investors will be less inclined to put their hard-earned into a company they do not understand. Tell the story, sell the vision and, most importantly, explain the progress.
Word of mouth is the other important source of legitimate information, according to the ASIC report, so get tongues wagging.
The easier a corporate narrative is to understand, the more people are likely to understand it. The more people who understand it, the more people are likely to talk about it with their family and friends.