Challenges faced by companies in engaging individual investors

From a listed company IRO’s (investor relations) perspective, engaging retail or individual investors, as I like to call them, presents a set of challenges that differ from those encountered when dealing with institutional investors. 

Why is that? 

Lack the same level of financial literacy and market knowledge as institutional investors. For them to make informed investment decisions, too, it is a must to provide information specifically to this audience in a clear, concise, and easy-to-digest form. 

Individual investors more often rely on a broader range of information sources, including social media, online forums, and financial news websites. In this sense, the companies need to maintain their narrative to ensure accurate and consistent information flow. 

From a regulatory perspective of a company, when it comes to information, individual investors are in the same line as larger investors (or should be). The basic rule, the same information for everyone, not depending on the portfolio size of the investors, applies. From the financial institutions' perspective, the regulatory environment for retail investors, however, differs quite a bit from what can be done with institutional investors. All this comes from the EU-wide regulation aiming to protect retail investors in their investment decisions and building trust in the financial markets overall. 

Individual investors often have shorter (or longer!) investment horizons than institutional investors, depending on each individual’s investment style. However, having said that individual investors may be more susceptible to market volatility and emotional decision-making. This is one reason why companies must develop strategies to engage and retain individual investors and build trust among this particular group of investors investing in their equities – also in new, innovative ways.

Writer is Founder & CEO of Blue Berry Share, a new & innovative approach for doing IR in the digital world. If you are seeing that the current means of doing IR are not that efficient any more for your company, please contact us for more information (mervi@blueberryshare.fi). We might have something for you.