Company Profiles

For Wealth Managers, It's Time To Understand "Investor Relations 3.0"

Tom Burroughes Group Editor 27 September 2022

For Wealth Managers, It's Time To Understand

The world of social media, new digital channels and a squeeze on traditional sell-side broker research is changing the discipline of "investor relations." We talk to a firm in the frontlines of this space.

Fund managers and individual investors trying to figure out the kind of information that firms disseminate about themselves have a new term to conjure with: Investor Relations 3.0. 

The term, which refers to the way in which firms describe what they do, their earnings, strategy and capital-raising requirements, is at a third stage. In the first iteration, it was about putting out company statements and supporting presentation materials; IR 2.0 was an evolution, concentrating more on targeting specific investors. 

And now IR 3.0 takes a holistic approach to IR and brings together both institutional and non-institutional investor networks, making best use of content, not just research content, and going into multiple channels and routes such as Linkedin, Google, Twitter and others through the smart use of digital marketing techniques.

That’s the view of Patrick Yau, managing director of investor relations at Edison Group, an investor research and advisory business. 

“Investors typically need seven or eight touchpoints with a company before they make a decision to buy that company’s shares. Through IR 3.0 we use a blend of content and media to connect in a smart and more differentiated way to accelerate this path to purchase,” Yau told this news service in a recent interview. “This is an evolution of what we have been seeing in consumer marketing, for example.”

In recent years, regulations such as the European Union’s MiFID II directive, squeezed traditional sell-side research, and forced companies with a need for capital to think of different ways to get their message across. Investors looking for research about companies also had to change how they operate. One of MiFID II’s features was a requirement for firms to unbundle research payments and make costs more transparent, with the aim of improving investors’ value for money. The net effect of this has been to make firms think twice about older ways of buying research, and the sell-side’s offerings have shrunk, according to reports.

Businesses such as Edison aim to fill the gap – and take research up to another level. 

Edison has partnerships with stock exchanges worldwide such as Deutsche Boerse, the Tel Aviv Stock Exchange, the New Zealand Stock Exchange and the OTC in the US. It covers 450 stocks and its roster of blue-chip clients include HSBC, Newmont Corp. (the world’s largest gold miner), Manchester United, YouGov, Severfield and Britvic.

Edison focuses on the public listed sector rather than privately held firms. 

Issuers pay for the data – this is the Edison revenue model which avoids biases and conflicts of interest, he said. “We do not take trading commissions or transaction fees, so have a very clear relationship with our client; we work entirely in their best interests. Our broad capital markets and investor relations experience across the company means we can offer the very best advice – and support this advice through a comprehensive range of capabilities, such as content, media distribution and broad access to investors,” Yau said. 

“There is big demand out there,” he said. 

Yau is convinced that modern digital technology should be embraced more fully to handle research and investor relations goals. 

Brokers, research firms and IR specialists must intensify their use of technology, web-based tools and platforms to ensure companies can continue to access the capital they need for growth, Yau said. 

Dark capital 
Yau talked about the need to tap into “dark capital.” What is that? 

This term refers to how sources of capital are increasingly dispersed and fragmented, which means that IR specialists need to rethink how they court holders of capital, and entities that are traditionally below-radar, such as family offices or wealth managers, Yau said.

“This is about those parts of the investor marketplace that have become neglected and don’t receive a lot of research or content support,” Yau said. Following regulatory changes, such as MiFID II: “We think there are large and hungry pools of capital out there that lack high quality information to make good investment decisions,” he said

“Some businesses struggle to see where they fit into the brokers’ world...some have become very neglected due the pressures on broker research caused by MiFID rules.”

The high-inflation/volatile market environment shows that firms must get their IR act together early.

“If you wait for markets to turn before getting your message out, you will miss the boat,” Yau added. 

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