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Feature

A recent American study ound 61 per cent o adults now

look online or health inormation.1 In Australia, The Age

recently quoted fndings rom a survey which ound onein every fve Australians misuse prescription and over-the-

counter medications, oten thanks to inormation gathered

via the global search engine, Google.2 Compare that to

some 20 years ago, it was unthinkable to consider asking

anyone but a trusted medical proessional or such advice.

I we trust the quality o advice sourced rom the internet or

something as important as our health, do we also trust the

internet or other high-involvement decisions such as where and

how to invest our money?

The rapid development o web-based communication channelshas led to the rise o social media which, or better or worse, has

made even more unverifed inormation easily available.

To better understand how and where retail investors obtain their

investment inormation, Computershare recently surveyed 2,000

securityholders.3

Where do investors currently fnd investmentinormation?

More than one-third o respondents use a stockbroker to obtain

investment inormation via ace-to-ace meetings. With brokers

being the traditional source o investment inormation or

many retail investors, it isnt surprising that they come up as the

preerred channel. However, our research also ound that there

are other options or fnding investment inormation in this digital

age.

Our research ound investors were generally divided into three

categories. Weve called them:

the Old Schoolers (the users o traditional media such as

television, radio and print)

the Quick Pickers (the savvy internet and e-communications

users) and

the Squids (the multi-channel users who are open to social

media).

Understanding securityholderssources of informationBy Andrew McClintock, Manager, Client Solutions Group, Computershare

The Old Schoolers

This group uses traditional media (or example, TV, radio, print

media and paper-based company communications) to access

investment inormation. They represent almost 17 per cent o

total respondents.

All Old Schoolers have internet access either at home, at work

(or both) and use the internet or other purposes. So even

though they are active on the Internet, they simply preerred the

traditional mainstream media when making investment decisions.

It is important to note that among this group, more than 90 per

cent have concerns with sourcing investment inormation online,

with the key ones set out in Table 1.

Table 1: Key fndings Old Schoolers

Did not know where to fnd inormation online 28%

Concerned about the credibility o online inormation 25%

Concerned about security issues online 21%

Did not make investment decisions by themselves 17%

Other reasons: lack o time, need help to use the internet 9%

The Quick PickersThis group generally accesses investment inormation via websites

and online subscriptions, including online versions o newspapers,

magazines, newsletters, periodicals and blogs, which supply the

delivery mechanism or providing the most up-to-date inormation.

They represent the majority o respondents (74 per cent).

According to an online survey conducted by Forbes in 2008, 65

per cent o individual investors considered the internet their most

important source o investment inormation.This was an increase

o almost 29 per cent rom a similar survey in 2005.4

Although the securityholders in this group were amiliar withfnding investment inormation online, they had yet to expand

their sources to include social media sites. The main reasons or


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610 Keeping good companies November 2010

not utilising social media to source investment inormation are set

out in Table 2.

Table 2: Key fndings Quick Pickers

Concerns about the credibility o inormation 36%

Not relevant or them 30%

Concerns about security issues 26%

Other reasons including time comsuming, privacy

issues, lack o awareness and did not consider social

media as the right channel

8%

Other reasons (eight per cent) include time consuming, privacy

issues, lack o awareness o social media as an investment

inormation source and did not consider social media as the rightchannel to fnd investment inormation.

When asked i they would be likely to use social media or

investment inormation in the next one to three years, only nine

per cent o the Quick Pickers said Yes and 23 per cent said

Maybe. The remaining 68 per cent believed they would not

be likely to use social media or investment inormation. While

this group may be web savvy, they remained unconvinced o the

credibility o the broader social media channels as a legitimate

source o investment advice.

The Squids

While the respondents in this group are in reality a subset o The

Quick Pickers, the dierence is that these respondents actively use

social media to access investment inormation, marking them as

the most resourceul, multi-channel users o the internet.

Social media is a relatively new orm o online communication

which acilitates content sharing and the exchange o ideas

among users in a community-style environment. Well-recognised

examples include Facebook and Twitter while popular investment

examples include HotCopper and Topstocks (in Australia) and

SeekingAlpha and TheMotleyFool (rom overseas).

Even though the use o social media has skyrocketed in the past fve

years (Facebook today has more than 500 million active users!5),

our research ound only eight per cent o overall respondents use

social media or investment inormation. Among that subset, 37 per

cent are active contributors on social media sites.

While 79 per cent o Fortune 100 companies have embraced

social media strategies6 to engage with their customers and use

it as a sales channel, other organisations are taking a wait-and-

see approach. Interestingly, our research indicates that over 75

per cent o social media users believed companies shouldhave a

presence in social media channels. We believe this is due to its keybenefts o immediate engagement, ease o use, and degree o

interactivity.

Many respondents (44 per cent) elt social media communication

channels should be used as needed, or by request only. This

suggests that companies need a clear strategy or sharing

inormation via this medium, rather than simply having apresence. A signifcant proportion (33 per cent) believed

social media should actively be used as a tool to communicate

investment advice to securityholders.

Further, 20 per cent o the Squids believed that social media

shouldnt be used by companies to communicate with

securityholders. This again may suggest a lingering doubt over

issues o securityholder privacy and risks o raud.

Figure 1: How should companies use social media to

communicate with securityholders?

Frequency o internet use or investment inormation

Table 3 shows how oten two groups o securityholders go online

to fnd investment inormation. The Squids are highly active on

the web with more than hal o them using it or investment

inormation every day. We suspect these are the day traders or

highly involved investors, constantly searching multiple sources or

all types o inormation on which to base their investment decisions.

Table 3: Frequency o internet use to fnd investment

inormation

Frequency The Squids The Quick Pickers

Daily 55% 39%

A ew times a week 22% 26%

Weekly 10% 11%

Less than once a week 13% 23%

The age correlation

We analysed the respondent groups o users by cross-dividingthem into our age groups: 25 years and below, 26 to 45 years,

46 to 65 years and 66 years and above.

As a tool tocommunicatewith securityholders

As needed orby request only

Never

Other

44%

33%20%

3%


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A surprising act emerged which seemed to reute the widely held

belie that the elderly are less receptive to e-communications.7

It is the 66 years and above group which shows the highest

percentage o the Quick Pickers at 76 per cent. In act, theamount o traditional users in this age group is only three per cent

more than that in the supposedly more web savvy 25 years and

below group.

In contrast, the use o social media shows an obvious correlation

with age group the older the age group, the lower the

percentage o Squids. (See Figure 2.)

Figure 2: Investment information channel by age group

The trusted source

We asked the Quick Pickers and the Squids to rank their sources o

investment inormation in order o importance. Table 4 comparestheir ranking rom the most important to the least important.

Table 4: Sources of investment information

The Quick Pickers

(internet and

e-communications users)

The Squids

(Social media users)

1 Online news and

proessional inormation

services (or example AFR.

com.au, Forbes.com)

1 ASX website

2 Brokers website ande-news

2 Companys website ande-communications

3 ASX website 3 Online news and

proessional inormation

services (or example AFR.

com.au, Forbes.com)

4 Companys website and

e-communications

4 Brokers website and

e-news

5 Financial blogs (or

example, Seeking Alpha,

Motley Fool)

6 Investment orums (orexample, Aussie Stock

Forums, Hot Copper)

7 Social networks (or

example Facebook,

Twitter, Stock Twits)

8 Online webinars

The most interesting aspect o the results in Table 4 is that even

among social media users, social media sites were deemed less

trustworthy than proessional and established company-branded

sources.

However, there may be another way o looking at the fndings. I

an organisation takes ownership o its own social media strategy,

as opposed to an independent aggregator or third-party supplier,

it is likely that investors will embrace the medium and the benefts

it can provide. In addition, where a blog or website is rated

highly among other social media users, it is deemed to be more

trustworthy on the basis that eedback rom the community helps

the most benefcial or most useul sites become more popular.

With trust being the key concern, companies need to address

the credibility o inormation sources and build trust with their

stakeholders proactively. Stean Grae, the ounder o Mext

Consulting and author o Trust Me, has worked with global

Squids

Old Schoolers

Quick Pickers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

25 and below

21%

18%

61%

66 and over

3%

21%

76%

46 65

7%

18%

75%

26 45

18%

11%

71%

The mature market

A surprising fnding o our study was that the largest market that is

sitting latent or companies to tap into, should they wish to use social

media, is the current 66 years and above age group. Companies

wishing to engage with this segment need to address the barriers

(credibility, relevance, security) and learn more about that groups

preerences and behaviours in order to engage with them eectively.

According to the Australian Governments Treasury report, over

the next 40 years, the proportion o the population over 65 years

old will almost double to around 25 per cent.8 This means the

current 25 years and below and part o the 26 to 46 years will

make up almost a quarter o the ageing population. Considering

they are among the highest users o social media right now, it is

possible that the use o social media will grow exponentially and

play a leading role in how investors source investment inormation

in the uture.

Companies should note this trend and consider including social

media as an additional communications vehicle or its key

stakeholder groups, such as customers and investors. The beneftso this include more engaged stakeholders that can be reached via

a cost-eective interaction channel.


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612 Keeping good companies November 2010

companies including Nokia, AXA, HSBC and Deutsche Bank to

drive brand engagement and business growth by building trust.

According to Stean:

Organisations need to understand that trust is driven by six

distinct acets stability, development, relationship, benet,

competence and vision. Trust and credibility can be built by

understanding which o the trust acets is best built with which

medium and thereore which messaging.

With social media, companies have at their disposal another

channel to engage investors and customers.

The challenges ahead

It is clear that retail investors, like most consumer groups, have

diverse needs when seeking out trustworthy investment advice.

While some preer the more tangible, traditional investment

inormation sources, others preer online resources, most likely

due to the convenience and currency o inormation that the

internet delivers. The pervasive use o the internet is undeniable.

Thereore, we can draw similarities between general societal

attitudes towards using the internet to source inormation and the

trend in retail investors researching online.

In the world o social media, services such as Twitter enable

individuals and companies to get in touch with literally millions o

ollowers quickly, easily and almost immediately. Similarly, Facebook

and YouTube, which have millions o repeat visitors daily, providea user-riendly and cost-eective environment to communicate

with specic stakeholder groups where ideas and experiences are

shared. The challenge o these media is to remedy investor concerns

regarding the credibility and security o their messages.

So while proessional inormation services and company

websites are still the most preerred sources o inormation,

the rise in popularity and acceptance o social media among

consumers represents a signicant opportunity or companies.

In act, a recent survey by the Australian Investor Relations

Association (AIRA) ound one-th o those proessionals surveyed

(stockbroking analysts and institutional investors) had madeinvestment decisions which were infuenced by inormation rom

social media!9

Given the cost-saving potential or many large organisations in

moving away rom traditional mail, this may be reason enough to

test the waters with social media channels when communicating

with potential retail investors. In addition, the delivery potential o

the internet contributes to ostering good corporate governance

through immediacy o inormation, two-way engagement, greater

transparency o company inormation and better stakeholder

experience.

The nature o social media dictates that the ripple eect is well

and truly present in the online environment: 70 per cent o social

media users trust a site more when it is highly rated by other

users. Thus, companies could make use o this compounding

power to build credibility through user endorsement. On the

fipside, companies should be aware that any credibility issues

not managed well could also spread as quickly, to potentially

disastrous eect.

All that said, while our survey points to a growing trend in the

sourcing o investment inormation online, the question still remains

how trustworthy is the source? A group o doctors based at the

Princess Alexandra Hospital in Brisbane did some research where

they googled the symptoms o 26 cases.10 And as it turns out, the

web search came up with the right diagnosis in 15 o those cases.

That equates to 57.7 per cent accuracy, or to put it more succinctly,

hal truths. Now thats ood or thought or any investor.

To learn more about investor communications strategies, contact

Andrew McClintock at [email protected].

Notes

1 Pew Research Centre, 2009, 61% o American adults look online or

health inormation, www.pewinternet.org/Press-Releases/2009/The-

Social-Lie-o-Health-Inormation.aspx, [8 October 2010]

2 Whyte S, 2010, Patients warned o Dr Google, The Age,

26 September, www.theage.com.au/national/patients-warned-o-dr-

google-20100925-15rob.html [8 October 2010]

3 A total o 2,179 securityholders responded to the survey, a majority o

whom resided in Australia and New Zealand (97 per cent)4 Sacho M, 2009, Investors say Internet most important source o

Inormation, WebProNews, 26 January, www.webpronews.com/

topnews/2009/01/26/investors-say-internet-most-important-source-o-

inormation, [9 October 2010]

5 Facebook, 2010, Press Room, Facebook, http://www.acebook.com/

press/ino.php?statistics, [9 October 2010]

6 Bloch E, 2010, How are companies leveraging social media?.

FlowTown, 7 March, http://www.fowtown.com/blog/how-are-

companies-leveraging-social-media, [9 October 2010]

7 Computershare, 2009, Investor Research Factors Affecting

e-Communications Behaviour

8 Treasury, 2004, Australias Demographic Challenges, The Treasury,

Australian Government, http://demographics.treasury.gov.au/

content/_download/australias_demographic_challenges/html/adc-04.asp [8 October 2010]

9 Australian Investor Relations Association and Financial & Corporate

Relations, 2010, Investors reminded to veriy social media

inormation, joint media release, 20 September, http://aira.org.

au/images/stories/AIRA_PDFs/MEDIA_RELEASE_-_IR_SOCIAL_

MEDIA_20092010.pd [8 October 2010]

10 Tang H and Ng J, 2006, Googling or a diagnosisuse o Google as a

diagnostic aid: internet based study, British Medical Journal, Vol 333,

pp 11431145, http://www.bmj.com/content/333/7579/1143.ull.

pd?sid=88c3585-eac8-4552-a12b-be4603349 [8 October 2010]

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