A wider education?
Many of these new shareholders who are feeling jittery have not been trained about the need to hold equities long-term and ride out the frequent peaks and troughs, says Feroldi. He says many have accessed “financial education” on social media – some high quality, but much of it not.
Feroldi says he would love issuers to offer more quality education to their new individual shareholders. “The best companies do a good job educating their shareholder base – the textbook example being investment firm Berkshire Hathaway,” he says. “But many others explain the case well for investing in their business but don’t emphasise the risks or provide more general education. To attract high-quality retail investors, they should also provide this more general education and make it as easy to understand as possible.”
Cliff Weight, director at the UK Individual Shareholders Society (Sharesoc), agrees there has been a lack of good financial education available for individual shareholders. One of Sharesoc’s aims is to address this, including with some upcoming videos aimed at younger investors.
“People blindsided by falling stock markets would not be so surprised if they had education,” he says. “Socially responsible employers will provide such education. We’ve also talked to the FCA about providing it at point-of-sale when people buy shares – although at present they say they prefer to nudge platforms, rather than grandstand on the issue.”
Thera Prins, CEO of Equiniti Financial Services UK, says many companies offer vast e-learning modules to their employees and could use similar solutions to inform and educate their retail investor base. This education could be part of a more front-footed strategy to engage with your shareholders, she adds. Greater engagement and better financial education would lead to more investing by individual shareholders. A recent study by BNY Mellon and the World Economic Forum found 75% of current retail investors would invest more if they had greater access to investing education.