A number of factors on the continent are pushing banks, brokers, and wealth managers to look at and change how they service the retail investor community, according to a new white paper from Broadridge.
The paper, The Rise of the Retail Investor, outlined five trends and themes that the company says has pushing a democratisation of corporate governance within Europe.
These are, say the authors, regulation compelling firms on how they service the voting requirements of retail investors; an increased awareness of the potential for investor backlash done publicly; the rise of ESG investing; growing expectations from the incoming generation of investors around digital support; and wider retail engagement.
The authors wrote: “The popularity of ESG investment strategies among the retail and institutional investor communities and the industry discourse around topics related to diversity and transparency of corporate governance signal that significant changes are afoot. Governance has long been a topic for discussion within the institutional investor community, but the retail investor community has increasingly begun to make its voice heard.”
A push from retail investors for the same services as their institutional counterpart is likely to rise over time, write Broadridge, as digital and social channels become more influential and wield more power.
The rise of fintech is also likely to have significant impacts. Online AGMs throughout the pandemic, say Broadridge, have enabled a greater number of investors to participate in governance processes (although this is not entirely true, as I have recently written a long story on this problem).
Broadridge write: “Regularly engaged shareholders tend to have more loyalty and feel less disenfranchised than those that have limited contact with the issuer. By offering voting capabilities—as mandated under SRD II—brokers, banks, wealth managers and other intermediaries will no longer represent a barrier to these retail investors. Given that the pandemic has also fostered a “work from anywhere” approach in many industries, mobile enablement is a key factor in the deployment of this technology, especially for younger investors.”
The report from Broadridge comes as S&P Global Market Intelligence recently reported that fintech investments across the UK, Germany, and France ‘surged’ last year, with investors putting three times as much into the sector in 2021 than they did in 2020.
S&P Global Market Intelligence said at the time: “Total investment in the three countries rose to more than $15bn in 2021, from just over $5bn in 2020, when investment almost halved from the previous year. The UK, home to Europe’s largest fintech hub — London, led the continent’s investment drive with more than $10bn raised, surpassing the pre-pandemic total of $7.65bn in 2019.”
It added: “The UK remained the dominant force in European fintech, attracting almost three times as much investment in 2021 as Germany.”