Corporate Access: Direct Interaction Is Getting TrendierDr-Reuter
In today’s time, global investors are more looking forward to conducting direct meetings as they are cutting back on the sell-side corporate access after the implementation of MiFID II. Since the regulations of MiFID II came into effect, investors are changing their ways of corporate access.
According to QuantiFire’s research (that was conducted in partnership with Investor Relations Society), it was revealed that:
- 54% of investors expect to be more or much more likely to rely on direct communication and management activities.
- Only a quarter expect to have fewer meetings with the company management.
- 51% of investors said that no payments will be made for corporate access.
This perception was noted at the end of 2017. As MiFID reforms are in full effect now, most companies are actually bypassing their banks and brokers and preferring to communicate directly with potential investors.
The new regulations of MiFID II require banks and brokers to charge fund managers for analyst research and corporate access, for instance, face-to-face meetings or roadshows, separately.
But, most fund managers are reluctant to pay for corporate access and many are also cautious of inadvertently violating the new EU market rules. Therefore, most companies in the EU jurisdictions are exploring different ways to avoid banks and brokers as middlemen and communicating directly with investors with the help of either internal investor relations or investor relations services.
The approaching of boycotting sell-side corporate access is affecting not only small city brokers but also influencing bank-organized investor conferences. While prices are still in flux, some banks are charging higher fee amounts, sometimes $500 a person or more, for non-clients (asset managers) who seek to attend these conferences but don’t buy research.
In fact, most asset managers are not showing interest to pay for attending these conferences and there are also reports of some being turned away at the door. This is not all. Sometimes, brokers have had to cancel events as they couldn’t attract enough investors. Now, everyone (interested clients) is attending conferences that are smaller and the era of offering luxury services such as spa retreats and fancy hotels has come to an end.
If you take a look at the survey of fund managers conducted by Capital Access Group, you would be surprised by the findings.
- 57% of fund managers are unlikely to pay a broker to arrange meetings, while 38% denied paying at all.
- 68% of fund managers expressed that they won’t pay a broker to arrange meetings even if they are interested in meeting a company. However, 22% of them seemed willing to pay in this scenario.
- 75% of fund managers said that they won’t like to pay more than £250, 19% would pay between £250 and £500 and only 6% said that they may pay more than £500 for arranging a meeting with a company.
There has been a dramatic surge in the number of online interactions between investors and companies. While highly liquid large-cap firms can get attention easily, small-cap firms don’t have this luxury. The role of technology is becoming more important than ever in building relationships between smaller companies and investors for corporate access.