The future of investor relations – ‘the silent disrupter’?

Recent changes to the financial markets are having a knock-on effect for investor relations. Keilah Codd discusses the changing talent pool, and encourages members’ collaboration to develop IROs of tomorrow.

This article expands upon Keilah’s recent presentation to the IR Sociey examination panel as part of her DipIR qualification. 

I recently moved to the IR department at the newly listed Quilter plc, having formed part of the team at Janus Henderson for over four and a half years. During my transition, I reflected on the journey I have come in my career to date – how my understanding of IR has grown with experience and any legacies I may have left behind as I move forward. It led me to consider how we, as a group of IR professionals, bring younger people into IR and create succession plans for our teams.

It is my belief that the awareness of IR amongst young professionals is significantly lower than that of functions in the wider financial services industries – accountancy, law, investment banking. It can be argued that with a limited number of listed companies and just a few members in each IR team, we are few in number, and without the large chartered societies behind us, have limited support to promote IR. However I am concerned that if we do not promote IR as a career to young people, we are missing an opportunity to build a future recruitment pool.

Over the last year or so, IR events have so often focused on disruptive forces affecting our roles and activities: MiFID II, artificial intelligence, ESG, and activist investors. The topics of discussion never focus on the development of IR teams and succession planning. If it is not considered, could the future of our teams be affected by a so called ‘silent disrupter’? Without building awareness of IR, will we miss the opportunity to recruit the candidates with the most potential?

A recent IR trends report compiled by recruiter Carter Murray documented the routes IR professionals have taken into their current roles. Over 66% of respondents came through financial services – accountancy or finance, the sell- and buy-side, corporate broking and corporate access. However these are the routes that experienced professionals have taken. There is very little data available as to how young university students or professionals can find their way into IR. 

We market our shares; how about our function?
ACPP – this is not the beginning of an eye test but stands for awareness, consideration, preference; and purchase. This is the journey a marketing professional will take a customer on in order to achieve one – or hopefully several – sales. Before they buy the product, the customer base needs to be made aware of the product, consider it as an item they would purchase, and prefer this product over others available in the market. This is the same journey made by the professionals who Carter Murray questioned. Which leads to my argument that, if we take a passive stance on building awareness of IR, we are stopping the journey to a role in IR before it has begun. 

To be successful in IR, we need to have a great skill set: communication, financial numeracy, literacy, marketing, administration and logistics. Equally, we need to have characteristics of integrity, confidence and presence, and be personable, persuasive and patient. When building an IR team, it is not easy to find all these characteristics and skills in single individuals. We need to bring people together from different backgrounds and with different experiences. It adds diversity of thought which can be hugely beneficial to the company and can make the experience of working in the team more enriching as members support and learn from one another. We need to have access to a diverse pool of recruits in order to build such a team. However I fear that with the impact of MiFID II, such a pool will be harder to access. 

A recent article in the Financial Times stated that when a FTSE 250 company posted an advert for a role in their IR team, within 24 hours all 12 of the sell-side analysts covering the stock had applied. With the sad uncertainty of the future of their careers, there is a flood of sell-side analysts looking for roles in IR. This could distort the pool of possible recruits, with engorged numbers of sell-siders over shadowing those with different skills sets. 
In order to maintain a diversity of individuals in the recruitment pool, we need to feed the machine – to encourage possible IROs along the marketing journey, for our collective benefit.

The disruptive pressures on IROs are not limited to an influx of sell-side CVs. As a result of MiFID II and the changing relationship with the markets, IR teams increasingly have to manage corporate access and engagement with the buy-side directly, support corporate broking-led roadshows, manage and compile their own consensus, respond to an increasing number of ESG requests and find time to adopt new technologies. How to respond to these pressures? Do IROs change the size of their team, seek an increase in their already pressured budgets, strategically decide what they can and cannot take on, or rely more on agency and/or broker support? 

The answer often given as the solution to these pressures is technology. However there is no single system which solves all of the pressures, it is costly, and if the focus is on technology, I fear we miss the opportunity to invest in individuals and transfer knowledge through teams. If IROs move out of the profession or retire without passing on that experience and knowledge, we risk creating a brain-drain. To be crude, young, inexperienced graduates could be a cheap resource and a solution to the disruptive pressures. As young professionals provide support, their understanding of IR can be developed and hopefully set them off on a long career in the industry.

I passionately believe that the beneficiaries of increasing awareness of IR can be wide-ranging. While for IR as a collective, awareness can underline the importance of the function, generate internal stakeholder support and aide our legacy and succession planning, the companies for which we work and the broader market and society can also benefit. By demonstrating how IR is the open, two-way conduit between stakeholders and listed companies, it could develop trust in corporates, especially in the millennial generation which is at an all-time low. Similarly, if we can encourage engagement with the financial markets, it would improve the understanding of the role which stocks and markets play in everyone’s future. 

Routes to increasing awareness
While not exhaustive, in presenting to the IR Society’s Diploma panel, I considered a three-step approach to increasing awareness of IR. Firstly, the Society’s Certificate in IR is doing a wonderful job at building momentum in promoting the role and professionalism of IR. When colleagues in communications functions at Henderson took the CIR, I was always heartened when they came to us afterwards and said: “I hadn’t realised what you do is so interesting” or “Oh, now I understand what you do!”.  

Secondly, as a Society, we could put together a coordinated outreach campaign focusing on the free media with which so many millennials and young professionals connect. Perhaps an Instagram account showcasing IRO profiles, or blog posts describing the day in the life of an IR team. There are ‘Diaries of a Fund Manager’, why not ‘Diaries of an IRO’. Equally, if creative agencies were willing to work with the IR Society on the outreach, each could benefit symbiotically – showcasing the agency’s abilities through the creation of engaging videos, infographics or alike. 

Lastly, the marketing professional’s holy grail: word of mouth. I encourage my fellow IROs to get out there and speak the word of IR. By sharing experiences through career presentations, short seminars at local colleges or universities or internal newsletter articles, we can best reach our target audience, with the only cost being a short amount of your time.

Benefits for all members
In conclusion, I passionately believe that the promotion and raising awareness of IR benefits many. It gives us all access to a wider and deeper resource pool; it mitigates the risk of ‘single geno-type’ IROs; it increases trust in corporates and the financial markets; and, it creates a society that is more engaged with the financial markets. While we may be small in number as a function and the opportunities to grow are limited, if we work together to promote IR, the results will benefit us all. 

Keilah Codd is IR manager at Quilter.

Published 9 January, 2019