There is little doubt that the march of technology has an impact on investor relations, and the introduction of Mifid II in January has given this a major boost. Technology has an important role to play in companies adapting to the new rules and the anticipated loss of sell-side presence, but professionals urge caution on ditching the human aspects of IR.
The first of many roles for technology under Mifid II is within corporate access. Once, the focus of access was meetings and roadshows. These cannot be disregarded, but the road map for the 21st century IRO shows a different journey. Now it also takes in corporate access platforms, linking multiple points of contact and focusing and channeling effective data points on the way.
In doing so, effective technology can only enhance the role of the IR professional, says Fraser Thorne, CEO of London-based investment research company Edison. ‘Anything that makes a corporate’s job easier in communicating with stakeholders is a good thing – and technology is inherently part of that,’ he says.
‘Why wouldn’t you use data?’ asks David Shriver, communications director at British online supermarket Ocado. ‘Why wouldn’t you use platforms that can make your impact greater and create efficiency in the process?’ Targeting platforms are available that are designed to create an efficient interface with potential new investors.
‘I think it’s important for everybody [in IR] to look at what is out there and see what is suitable for them,’ adds Shriver. ‘Technology and smart targeting are the name of the game: everybody’s time is scarce and finite.’
According to David Lloyd-Seed, director of IR at O2, ‘There has been great growth and development in systems for IROs for a few years. Progress has been quite significant to the extent that there are some powerful tools out there. IROs should use them, as they will make them look impressive in front of their management.’
Offering both a challenge and a warning, Kristen Pross, global head of IR intelligence at Nasdaq Corporate Solutions, says that from now on, technology is always going to be part of the process for the IRO. ‘The element of who you are talking to and how you are recording it is vitally important,’ she notes. ‘IROs can and should measure the effectiveness of the conversations of those people they are reaching out to.’
Hitting targets
Richard Davies, managing director at RD:IR, offers another perspective. ‘There has been a great deal of talk in the IR market about the move to online targeting and corporate access,’ he says. ‘Useful and efficient targeting via a platform relies on that platform’s underlying data being largely accurate, which can vary by provider and by market. Ownership data, often the basis of targeting analysis, is patchy for most global markets, for example.’
Putting this into a wider perspective, he adds: ‘Technology can help IR teams immensely in the post-Mifid II environment. But it is not the entire answer. Investor relations – and its counterpoint, active investment management – remain practices based on human interaction. Many investors shun corporate access apps and prefer to talk to firms directly. Unless the access apps reach the critical mass where the bulk of the buy side is signed up, the model provides a worse situation for companies than the limitations of the broker-distribution model.’
In other words, relying completely on technology for targeting or corporate access could be described as akin to believing dating apps will provide you with long-term relationships: it might happen, but you’ll be one of the lucky ones if it does. It could also be noted that there is so much focus on the logistical void brokers will leave behind in the wake of Mifid II that it is easy to forget the entire corporate access process starts with identifying a list of targets.
There is a clear defining benefit to shareholder surveillance. ‘Technological shareholder ID always tells you what is changing in the ownership base – and being able to react to that change quickly is important,’ observes Pross.
Shriver agrees: ‘If you’re not using technology to identify new shareholders on the register, you run the risk of spending a lot of unnecessary time unfocused or engaging in the wrong way. Technology is vital for smart IR work – and be in no doubt: Mifid II accelerates the process.’
For Alison Owers, CEO of share analytics firm Orient Capital, there has been strategic thinking on this issue for some time. ‘We’ve long considered how technology can better enhance the work we provide around shareholder ID, so we developed software to enable us to leverage this data and combine it with core IR requirements to make it more effective and transparent for our clients,’ she says.
Take a step back
With all this talk about the advantages of technology, we need to step back and create a checklist of requirements IROs need to address, says Pross. Her own short checklist for IROs includes asking what you are trying to achieve, what your needs are and what you have seen change, and then applying your tech needs to those areas. Owers echoes this approach. ‘The point for the IRO is to embrace technology as a complement that not only underpins and supports the IR function, but also improves and streamlines it,’she suggests. ‘Think about the goals you have been trying to achieve. You need to approach technology with a sense of logic.’
Amit Sanghvi, European managing director at Q4, advises: ‘Look for a technological solution that covers the entire cycle of investor relations, not just the logistical elements. That is key to running a fluid, cost-effective and efficient IR program. Look for technologies that deliver insights, not just data. We don’t just identify shareholders for IROs and then expect them to work out who to target. We show them who is and isn’t interested in their equity story right now so they can add value by doing what they do best: putting relationships back into investor relations.’
It comes back to the fundamentals of IR, Owers says. ‘Technology is an enabler,’ she explains. ‘I don’t think it will ever replace the fundamental IR role around direct and face-to-face interaction. It should support the function, but there should always be a human element and reality check, by someone who understands what the role is.’
Marina Zakharova de Calero, CEO at Conduit Communications, also notes that IROs should look at how to adopt technology effectively. ‘As pressure on internal IR resources increases, IR teams should look at selective adoption of technology,’ she says. ‘Customer relationship management systems and corporate access platforms with targeting and feedback collection capabilities are the most obvious tools to ease this pressure and increase efficiency. There are many options in the market now that would suit different budgets. All have their strengths, but also limitations. Be clear what your needs are and choose wisely: look at the quality and source of data, the compatibility and the geographical coverage.
‘Although technology is essential to improving the productivity of IR teams, it is by no means a substitute for direct engagement with the investment community. After all, IR is about building long-term relationships with shareholders.’
For Pross, it is again about measurement and effectiveness. ‘I think IROs should really focus on meeting measurements, meeting effectiveness and targeting,’ she says. ‘Over time, these services will evolve and I think these are the priorities.’
Evolution, not revolution
When it comes to IROs embracing technology, Lloyd-Seed sees it as an evolution rather than a revolution, particularly with the impact of Mifid II. ‘I think it is a transition from getting old stuff for free from corporate brokers to being more proactive and dynamic in your outreach program,’ he explains. ‘There is an opportunity for the IR professional to take much more control of the agenda, and new systems can do that powerfully.’
‘What we see is that companies are doing more meetings themselves and that is where technology is playing a role,’ observes Michael Hufton, ingage managing director. ‘Most corporate IR teams are seeing the scope of what they are having to do growing as a result of Mifid II. And they must be the eyes, ears and mouth of the company more than ever before, so there is more appetite for technological solutions… to make it efficient.’
Shriver adds that it is incumbent on IROs to think these things through and engage with the various platforms to see what is best for them. ‘The old reactive way – relying on brokers, relying on the sell side to make sure you are talking to the right people – that era has gone,’ he points out. ‘It is [now about] using technology to make data-driven decisions and using technology to facilitate the communication engagement with investors.’
That said, across the investor relations community there is often a cautious approach to Mifid II, a point emphasized by Monique Popli, head of product strategy and marketing at investor data group Ipreo. ‘I think for many companies there was already a budget set for 2018 so now it’s like, Let’s wait and see,’ she says.
And on the subject of budgets, let’s not forget that there is, naturally, a cost to all of this. ‘Companies have to face up to the fact that new technology costs money,’ warns Thorne. ‘It is not particularly expensive in terms of the value it will return to the business. But the IR team reports to the finance director, who isn’t someone who is going to be expansive with the budget.’
Hufton agrees, but says there is a positive angle. ‘The changes on the ground via Mifid II are becoming more apparent to senior management, which in some cases is helping to increase budgets – and that is the strong case for technology, because you need money to pay for it,’ he says.
The key message is that technology needs to be used in a thoughtful way to aid the building of longer-term relationships between issuers and investors. In a best- case scenario, the future could see the ‘Facebook’ of IR emerge, something that puts fund managers and companies in direct contact – but that isn’t on the radar just yet. In the meantime, the pressure is on investor relations teams to act.
‘Some [IR professionals] have moved quickly, some will move more slowly and some will take even longer,’ Lloyd-Seed notes. ‘But I wouldn’t say it’s a 100-meter race; it is more of a marathon.’ As with any race, however, getting ahead early gives you a major advantage.
This article first appeared in the Summer 2018 issue of IR Magazine
