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Apr 04, 2022

Selling the retail story

It’s the diverse group of shareholders on everyone’s lips, emerging from the pandemic as confident, nimble and empowered. But what are the factors driving today’s retail investor, and how are IROs responding?

It could be argued that today’s retail investors have the best of most worlds: they can invest for little or no fees, have access to the same information as their institutional investor peers, enjoy a plethora of new technology at their fingertips and can shift between day trading and long-term investing to suit their portfolio ambitions.

This new sense of freedom is not only driving retail investors’ enthusiasm to invest, according to Jason Rechel, head of IR and corporate development at Chicago-based Sprout Social, but is also fundamentally blurring the lines between retail and institutional investors as never before.

‘Retail investment has been democratized,’ he says. ‘The barriers to stock ownership are minimal – trading fees have come down, many brokerages have opened up the ability for investors to own fractions of shares, and changing workplace dynamics mean retail investors have a greater ability to trade during market hours.

‘Couple this with the spread of information on social media and the market has changed dramatically. In many cases, individual investors have the same access to information as institutional investors, and no barriers to share ownership. This is fundamentally different from any other time in the history of the market.’

Young blood

As outlined by Rechel, the growth of commission-free trading apps, such as Robinhood or Fidelity’s retail offering, has removed a great number of obstacles to investing and introduced an entirely new generation of investors to the market.

Previously most often the domain of wealthy and older investors, retail share ownership today is just as likely to be populated by young investors of average income, accessing wealth-building opportunities on the go, regardless of location or time zone.

A Deutsche Bank survey in February 2021 revealed that nearly half of its respondents said they were investing for the first time, with 61 percent being under the age of 34. The same survey also found that half of all 25-to-34-year-olds were planning to spend 50 percent of their stimulus checks – their state-provided economic aid payments in the wake of the pandemic – on stocks, far more than the 16 percent of those aged over 55.

Around half of the shareholders at Vancouver-based entertainment company Thunderbird Entertainment Group are retail investors. The company’s shareholder base reflects the predisposition of many retail investors to invest with emotion, in brands that they like and identify with.

Captive audiences created by the pandemic have also worked in the company’s favor, as Jennifer McCarron, Thunderbird’s CEO, notes.

‘There is a parallel between the recent surge in retail investors and my industry, and it involves a confluence of elements that creates an environment to enable growth,' she says. 'In many respects, the pandemic served as a lightning rod for both. This is because the world was under lockdown and people had more time to simply consume information and content – whether for work, interest, entertainment, escape or investments.

‘Our business model as a media company has vast distribution into the general population, which of course also attracts new retail investors. Those investors who love and follow our shows typically become shareholders of the company.’

This is an extract of an article that was published in the Spring 2022 issue of IR Magazine. Click here to read the full article.