The investor relations world just got a whole lot tougher. The past five years have seen a boom in IR recruitment across Europe as companies enjoyed the rising equity markets. Now comes the real test. As the economic downturn begins to bite, some companies see IR departments as an ideal area for cost-cutting. And agencies that have been riding high on M&A deals and IPO work are finding themselves in a tough environment.
Despite these trends, investor relations remains an attractive recruitment field for a range of professionals. The best companies recognize the need to communicate in bad times as well as good, so there will continue to be opportunities in IR through a recession.
But what qualities are companies and agencies looking for in an IR professional? The role demands strong communications abilities and financial nous, and has tended to find new recruits from both sides in the past. Some believe that communications strengths reign supreme, arguing that financial knowledge can be taught whereas the ability to communicate is more of an innate skill. Others favor candidates with financial knowledge and experience, believing that an in-depth understanding of what drives companies and how markets work is the key to a good investor relations professional.
Those who can boast prowess in both will stand a strong chance of moving up in the IR world. Recent years have seen a trend toward recruiting people with market experience – former fund managers and securities analysts with knowledge of a relevant sector have been particularly popular. More recently, investment bankers, lawyers and other professionals have been beating at the investor relations door, a trend that’s likely to increase during this market downturn.
The need for a financial background has been partially driven by the evolution of the investor relations discipline. The first recruits to the function within the US and Europe tended to be drafted in from the PR department and would report to the head of communications. As the stature of investor relations has increased, so the function has leaned toward the finance department, with reporting lines direct to the finance director or CFO.
This approach is not always the best option. Some leading IR departments take a different tack with, say, reporting lines direct to the chief executive and a base within the communications department. The key to a good in-house IR function seems to lie in ensuring that whoever manages it has the ear of top management. After all, if you are charged with speaking to key financial and media audiences on behalf of the company, you had better be in a position to know what is going on.
Many investor relations professionals begin or advance their career in the consultancy world, since it can offer greater opportunities for diversity. While an in-house IRO has the advantage of total immersion in one company and sector, investor relations consultants can find themselves advising at a senior level across a range of businesses.
The pros and cons of whether to go down the consultancy or in-house route will tend to vary with each individual. Some will thrive in the constant buzz and changing environment of the consultancy world. Others will find it frustrating that they do not get total immersion in one company’s story. That said, if you don’t have any particular industry knowledge, dipping your toes into a range of stories as a consultant can be an excellent way of deciding which sector you find most appealing.
Be prepared for lots of competition whichever route you take. With so many disciplines feeding into the role, and a growing awareness of its existence, the range of people seeking a first step on the investor relations ladder is likely to increase. How, then, can you get ahead of the competition?
IR has changed markedly during its recent growth. Five years ago, few European companies had investor relations departments, let alone IR web sites. Today, the internet is a crucial part of the IR mix. It is a medium that lends itself to the function, with so much financial communication requiring wide distribution and easy cross-border access. Investor relations web sites have become more important as financial regulators seek to ensure that institutional and retail shareholders have the same access to the same information at the same time.
Candidates who can show an understanding and awareness of technology issues relevant to IR will be a step ahead of the competition. In the increasingly wired and pressurized financial world, it could be a key step in determining when and how you enter the investor relations profession.
This article was first published in the Career Management section at www.spencerstuart.com
