The spoilsport values of ‘good taste’ and ‘respect’ have led to the unfortunate demise of the Miss World competition.
As a consequence, the only beauty contest that can really quicken the pulse of an IRO these days is one involving a succession of investor relations firms. With competition so tight among rival agencies, corporate communications executives can effectively sit back as a stream of firms gamely display their wares and vie for the lucrative business at stake.
This survey looks at criteria to help you choose your investor relations firm. We talked to a random cross-section of different firms – by no means a representative sample of the crop, and certainly not a recommendation.
As you go about selecting investor relations counsel, you might notice an increased hint of desperation as these firms try to secure your business in these bearish times – especially when the competition between them is so fierce. ‘There’s so much over-capacity in the investor relations market. The market is so tight,’ comments Carol Ruth of the Ruth Group, a New York-based agency. ‘One of the top firms told us that they’d recently laid off 100 staff.’ So be prepared to be fought over.
That’s all very flattering but the range of options could well give the poor investor relations officer a headache. Is a big firm better? Or would a one-person boutique offer a more personal service?
Is it best to plump for a dedicated investor relations firm? Or would a one-stop IR/PR/financial advertising shop prove to be a better bet? These are just a few of the questions over which the corporate decision-maker must mull.
It’s no use just waiting for a raft of investor relations firms to pitch with the hope that a gut feeling will crop up to make the decision easy. Companies should prepare thoroughly and consider what it is they want from their IR firm. ‘You have to understand what it is you want to achieve and know what market you want to be part of,’ opines Jim Sansevero of Citigate Dewe Rogerson in New York. And, of course, it is only when you’ve determined your objectives that you can begin the selection process. Once you know what you want for your company, you can draw up a list of criteria to apply to the decision-making process. But even that is easier said than done.
What is good?
The million dollar question is what characteristics make for a good IR firm? Ask a few firms which criteria are important and you’ll receive a variety of different – and predictably self-promoting – answers. But one thing that does remain fairly constant among their responses is the suggestion that companies should look for agencies with an established track record of proven investor relations know-how.
‘You want the firm to have experience,’ says Roger Pondel of California-based Pondel/Wilkinson MSL, now a division of PR firm Manning Selvage and Lee. ‘The nature of IR means that it requires professional maturity. In most cases, that means experience as an IR professional, and being used to working with a CEO or a CFO. The client should demand that they’re consulting with their peers. That means having the seniors working for you and getting to meet them. And by a senior I mean someone with eight to ten years in investor relations.’
With this experience and standing will come an innate understanding of the IR ballpark – which, after all, is the main reason why many companies decide to employ an investor relations firm in the first place. As Pondel says, ‘The firm should have deep knowledge of the financial media and of Wall Street.’
‘We have our finger on what the financial community is doing and on how companies should position themselves,’ echoes Ruth.
Experience or experience
Mind you, Pondel is quick to add that specific experience is crucial: ‘You want a firm that specializes in IR, as opposed to PR,’ he states. ‘We’re a dedicated IR firm – that’s all we do. We represent middle market companies on a day to day basis. We also counsel bigger companies on special projects such as perception analysis, roadshows and proxy counseling.’
The difference between IR and PR is a distinction that many companies often overlook, says Anthony Spiro, the man behind UK-based Spiro Financial and a part-time director at Taylor Rafferty. ‘The first thing is to actually understand that investor relations is not just an extension of PR,’ he says. ‘Sometimes the client doesn’t realize that. And what happens is that if a PR firm isn’t really doing IR, they’ll say that they do and, of course, the client has no reason to disbelieve them.’
Indeed, Spiro offers anecdotal evidence about two PR firms – both without IR experience – that have taken on investor relations briefs to avoid losing business from existing PR clients.
Obviously, there are numerous firms that combine investor relations with public relations. Some clearly view the marriage as a selling point; others regard it as a distraction. Pondel thinks that it is a question of the weight that is attached to each discipline. ‘There are a number of PR firms that simply have departments that do IR,’ he says. ‘In that case, I think it is difficult for them to do more than just the mechanics. It’d be hard for them to get on the phone to an analyst or money manager.
‘Besides, the nuances of IR and PR are different. There are some skills that may be similar such as the ability to write well and communicate but, in IR, you also need to be adept at other disciplines, such as law and accounting.’
One-stop shop
So a public relations agency masquerading as an IR firm is a big no-no. But that doesn’t necessarily rule out firms with services that extend beyond straight investor relations. Indeed, the growing cross-fertilization across communications fields is drawing once disparate disciplines together. Recent advances in technology and the erstwhile bull market have drawn more and more new investors into the market, meaning that all of a company’s communications, PR and advertising are increasingly done with an eye to how they could impact the stock.
‘It’s important to see the integration of a variety of different services,’ states Sansevero. ‘We offer investor relations counseling – but we also provide shareholder intelligence as well as advice on financial media opportunities. Beyond the Dewe Rogerson services, we are also involved in marketing and branding so if your company is not well known in a certain market we can help you to raise your profile. The corporate brand can drive the value of the company – so we also help companies with advertising, corporate videos and web sites. We integrate all of these features and offer them on a global basis. We combine these services in a seamless way, and we put our teams together purposely. There are some companies who say We don’t need all that and that’s fine. But it’s more than likely that they do. They just don’t realize it.’
Operationally, it should certainly make outsourcing IR products and services easier if you can get all you need from one vendor. But be sure to take the time to calculate whether the combined package will actually spell cost savings or a convenient but more expensive bundle.
Small, medium or large?
Regardless of whether an IR firm is a tiny one-person outfit or an enormous globe-spanning behemoth, it will almost certainly try to pass off its size – small or large – as a real boon. At the same time, these firms are often happy to express reservations about the capabilities of those firms at the opposite end of the spectrum.
‘You should be cautious about the size of the firm,’ says Pondel. ‘Investor relations firms in general are not large. A handful have gotten very large to the point where they’re referred to as the H&R Block of investor relations – they have offices almost on every corner. And maybe they’re not of the caliber that you’d want. Big firms can be very formulaic in the way they approach IR and you often find that executives have morphed into administrators.’
Indeed, this is a point echoed by several smaller firms – bigger companies provide an inherently less personal service, denying you access to the expertise of the firms’ senior staff. Carol Ruth is happy that her firm avoids this problem. Despite recent rapid growth which has seen her claim the number five position among New York IR firms, Ruth has been careful to retain the boutique nature of the business. ‘Clients come to us because we have specialties, because they want to be talking to the partners,’ she says. ‘They don’t just want some junior issuing releases.’
Ruth warns that this danger might not always be immediately apparent, thanks to the way firms typically pitch for new business. ‘A company will often come in to see them and meet the top people there, but when the work starts they find they’re dealing with the most junior people. I think you need people that have done it and been there.’
Spiro agrees that this kind of behavior is common and that it is crucial to sort out who you’ll be liaising with. ‘What you don’t want is some silver-tongued salesman pitching to you, someone you then never see again,’ he concurs. ‘What’s important is that it’s made quite clear who is going to be working for you.’
Citigate Dewe Rogerson’s Sansevero is able to offer the perspective of one of the biggest IR firms. And he accepts that, in agencies of that size, the discrepancy that exists of different teams pitching for the business and then ultimately working on it isn’t unheard of but refutes that it is the norm in his firm. ‘That is a reality that people do come across,’ he says. ‘We try not to do that. We try to send out the team that will be working for the client. We have quite a flat structure here so the team that’s pitching will usually be the team that’s working for you. But is it a valid complaint? Yes. That is a selling point for smaller IR firms.’
Quality counts
With Spiro’s positions at both Taylor Rafferty and his own set-up, he is well-placed to judge the relative pitfalls and merits of both small and large firms. Yet he doesn’t necessarily see size as an issue. ‘I don’t think the size is important at all,’ he says. ‘It’s just a question of the quality of service you can provide.’
But Spiro is not suggesting size has no bearing on the choice of IR firm. Of course, smaller firms claim to offer a more hands-on, personal service but they do have their limitations. This often means that they are forced to specialize and will confine themselves to companies of a certain size or location. Pondel/Wilkinson, for example, only works for clients listed in the US. Equally, Spiro Financial hasn’t the global reach to service international clients: Spiro describes his patch as ‘small UK companies, helping with their UK investor relations.’
The firm’s small size throws up another small limitation. ‘I’m a one-man band,’ he says. ‘The one major boundary is a physical boundary – I can’t be in two places at once. But, I’m not looking to build an empire.’
Spiro’s view is that companies should base their assessment on the personnel of each firm they consider – and that means meeting the staff who will be handling day-to-day business. ‘If you’re organizing a roadshow you want to deal with someone who you know will be having sleepless nights worrying about the position of the projector for the breakfast presentation,’ he says. ‘What you don’t want is a firm of people saying It’s not our department, people who are so busy passing the buck that they won’t do the job properly. And you can get some really good larger firms with that attention to detail.’
People power
It goes without saying that the key attributes of a good IR firm are ones that can’t be gauged simply by leafing through marketing literature. Having arranged a meeting with a firm, you really have to suss out the people who will be involved.
‘Attention. People. Experience,’ says Ruth, when asked what companies should look out for. ‘Other firms are often too busy trying to take on new business. The reason we’re all here is that we want to work with our clients. We go to great lengths to see a company’s financials and when we pitch we talk about the business.’
This care and personal attention obviously has mutual benefits. ‘Small clients can become big clients,’ remarks Spiro. ‘What you don’t want is small clients becoming someone else’s big clients.’
Spiro asserts that, from the very start, companies should try to empower themselves. ‘They should make sure they stay in control of their own communication with investors,’ he states. ‘The small companies I work with – by which I mean companies with a capitalization under £120 mn – haven’t realized that they can take control of their own communications.’
From do-everything supermarkets to boutique firm, there’s plenty of choice for an investor relations officer shopping for IR counsel. It can be a tough task choosing. Then again, for someone used to serving demanding Wall Street clients, it might be fun to be the customer for a change. After all, the customer is always right.
Talking money
If budget is a concern – and when is it not – be aware that there’s no set rule as to which type or size of investor relations firm is cheaper. It depends, of course, on what it is you want them to do. But there are still issues to consider.
Smaller, specialized IR agencies argue that they can be cheaper than the bigger ones. In their view, the assumption that a larger firm’s resources and people will add huge value isn’t borne out by reality. And they claim that a company can end up paying for them whether they need them or not. That’s especially true when firms operate on a time-input basis as opposed to retainers. Many firms choose to use retainers because they assert that it should render the relationship closer. That way, they say, a client need not worry about calling their firm and paying by the hour.
Roger Pondel of Pondel/Wilkinson MSL states, ‘If it’s a full-service program, we will be paid a retainer. That puts us on the same page as the employees.’
Of course, in the long run, this might ramp up the cost significantly. And the initial outlay might be substantial. With that in mind, both Pondel and Anthony Spiro of Spiro Financial agree that a ‘horses for courses’ rule should be applied. ‘The pay structure is driven by the client,’ says Spiro. ‘A small firm might not be able to afford to pay out such a big retainer. They might want to pay a small sum of money and pay the rest on a time-input basis. It calls for flexibility.’
Big leagues-US financial PR/IR
| Rank | Firm | 2000 net fees ($) |
| 1 | Edelman PR Worldwide | 30,201,458 |
| 2 | Ruder Finn | 11,022,000 |
| 3 | KCSA PR Worldwide | 6,200,000 |
| 4 | Makovsky & Co | 5,218,000 |
| 5 | PepperCom | 4,637,728 |
| 6 | DeVries | 2,321,205 |
| 7 | The Ruth Group | 2,227,220 |
| 8 | Padilla Speer Beardsley | 2,194,441 |
| 9 | Sloane & Co | 2,110,000 |
| 10 | Stanton Crenshaw Communications | 2,069,550 |
| 11 | Emmanuel Kerr Kilsby | 1,300,000 |
| 12 | Corporate Technology Communications | 1,243,040 |
| 13 | Public Communications | 984,453 |
| 14 | Thorp & Co | 914,136 |
| 15 | Carter Ryley Thomas | 747,415 |
| 16 | Stoorza Communications | 642,500 |
| 17 | Patrice Tanaka & Co | 538,000 |
| 18 | PR21 | 476,976 |
| 19 | Boasberg Wheeler | 429,000 |
| 20 | Schneider & Associates | 424,845 |
Source: O’Dwyer’s PR Daily (odwyerpr.com)
Chart-toppers-UK financial PR
| Rank | Firm | No. of clients |
| 1 | Financial Dynamics | 125.0 |
| 2 | Buchanan Communications | 123.0 |
| 3 | Citigate Dewe Rogerson | 101.0 |
| 4 | Square Mile BSMG Worldwide | 98.0 |
| 5 | College Hill | 94.0 |
| 6 | Brunswick | 74.0 |
| 7 | Lansons Communications | 63.0 |
| 8 | Hudson Sandler | 50.0 |
| 9 | Binns & Co | 45.0 |
| 10 | Bell Pottinger Financial | 41.0 |
| 11 | Maitland Consultancy | 40.0 |
| 12 | Tavistock Communications | 37.0 |
| 13 | Bankside Consultants | 35.0 |
| 14 | Golin/Harris Ludgate | 32.0 |
| 15 | Holborn Public Relations | 32.0 |
| 16 | Weber Shandwick Worldwide | 31.0 |
| 17 | Finsbury | 29.0 |
| 18 | Gavin Anderson & Co. | 28.0 |
| 19 | Biddick Associates | 26.0 |
| 20 | Merlin Financial | 25.0 |
Source: Hemscott.net
