Investing in stocks was widely considered to be something of an exclusive activity that only a select group of people could participate in just a few decades ago. How times have changed. Today, your average 18-year-old with a cellphone can construct a portfolio of stocks that are as diversified as those of many high-net-worth individuals.
Retail investors have historically been overlooked by many issuers because they trade in smaller increments than larger institutional investors. This segment of the market has shown continued growth, however, with one Bloomberg Intelligence analyst estimating that, in 2021, retail investors accounted for 23% of all US equity trading, twice the amount of 2019, and equivalent to “all hedge funds and mutual funds combined.”
The use of trading apps – meaning online platforms where people can easily buy or sell shares of companies on their phones – was already growing rapidly before the pandemic. But the spread of COVID-19 resulted in people increasingly spending their time at home and trading more actively during that time. Roughly 10 million Americans opened new online brokerage accounts in 2020, and this trend has continued since then, with an additional six million Americans downloading a trading app in January 2021 alone.
With greater access to information across social media networks and financial technologies that have completely disrupted traditional investment activities, retail investors are more empowered to take control of their financial literacy, as well as to act on the investment ideas they are finding online.
The Age of DIY Research and Investing is Upon Us
Investors who opened their first retail brokerage account in 2020 or later tend to seek advice from finance professionals at a significantly lower rate than individuals who have been investing over longer periods of time. These newer – and often younger – investors get the information they are looking for on social networks like Twitter, Reddit and TikTok, while conducting and executing their own due diligence and trades.
Whether it’s educational content that breaks down technical terms, or personal investing stories on gains and losses in the market, this demographic wants to hear from voices like theirs – in the places they tend to congregate.
As online communities increasingly become echo chambers of information and activity, retail investors continue to prove they are a motivated and engaged force that can no longer be ignored.
Who Are Retail Investors Getting Their Information From?
The demand for simple, useful content has risen as online conversations occur at dizzying speeds. Retail investors who rely on information that they find on social media are increasingly looking to financial influencers (“Finfluencers”) to inform/drive their investment decisions. By March 2022, the TikTok hashtag #investing had amassed 5.8 billion views, while #FinTok logged over 900 million views.
Although the power of Finfluencers make these individuals ideal distribution channels for a company’s news and information, it’s very important to exercise caution – whether as an issuer or industry professional – to avoid associating with Finfluencers who lack transparency or potentially have ulterior motives. Competitive monetary incentives available to Finfluencers further blur the line between financial advice and a self-serving agenda.
The buzz around an opportunity can easily turn to hype, which isn’t the best way for an issuer to get the word out or to build a credible reputation. With the proper caution taken, however, there is an opportunity for issuers and financial services professionals to leverage the influencer marketing community – as long as any approach is done strategically and with integrity.
Reimagine Who You Reach and How To Convert Them
Issuers looking to raise capital and build brand awareness with modern retail investors should consider the following three digital marketing recommendations:
1) Understand modern retail investors and take them through a strategically designed marketing funnel.
Retail investors make investment decisions based on positive public buzz about a company, affinity for its products or service, and familiarity. By taking retail investors on a digital marketing journey, commonly referred to as a “marketing funnel” or a “lead generation funnel,” issuers can automate a consistent flow of qualified investors.
While the funnel may not be entirely linear, we’ve broken it down into four phases, based on the AIDA Model:
Build Awareness: An important goal at the top of the funnel is to attract attention and engage investors (leads) using effective messaging and branding with high appeal. To get in front of the right eyes, practice audience identification and take the time to investigate where target leads congregate online.
For issuers, building awareness should involve some educational content, advertisements and a dynamic landing page with a singular call-to-action that clearly addresses the investment opportunity.
Generate Interest: As leads continue through the funnel, they begin to look for more specific information. It’s critical to provide informational content that will drive a lead further along the funnel.
Issuers can consult with their marketing teams to interpret the data generated from previously shared content. Clicks, impressions, shares, and open rates are just some analytics that can help determine subsequent content marketing strategies.
Stimulate Desire: The goal at this phase of the funnel is to turn interest into desire. Whether through an email lead nurturing campaign (an automated and personalized set of emails) or thought leadership pieces that are relevant to an industry, illustrate the gap between where leads are at this moment and where they could be if they learn more about your investment opportunity.
Encourage Action: Serious leads will want to take action. Put them on a clear and simple path to pursue the investment opportunity with a clickable link or button.
2) Optimize your reach by reimagining the format of your content and making it specific to the platform.
Issuers wishing to benefit from the rise of retail investors should focus on education and fostering online communities. Gone are the days of pushing out press releases and holding quarterly earnings calls as an issuer’s primary means of investor engagement.
It’s not that press releases are dead, but are you optimizing them for ultimate reach? You can do this by repurposing your press release into shorter, more shareable content and disseminating these pieces of content across the appropriate digital channels.
You can also repurpose and disseminate thought leadership pieces, case studies, white papers, videos and smaller content pieces across your website and social networks. The more information you have available online, the more visibility you earn – which generates more conversations.
3) Include Finfluencers in your digital marketing strategy and get in front of their already engaged audiences.
Issuers should focus on working with Finfluencers who champion educational content with accurate, proven information, while avoiding Finfluencers who share less credible content and who put their own interests ahead of their followers.
To work with Finfluencers in a responsible and beneficial way, it’s important to do some digging into their online image, community and past posting activities. Professional marketing firms like Ext. Digital can provide access to vetted and industry-relevant Finfluencers by finding innovative new ways to reach retail investors. Ext. Digital partners with a unique and innovative new influencer marketing platform Spectrum by Xemoto Media. In the case of Xemoto, these Finfluencers are part of the firm’s proprietary financial influencer network and have a combined potential reach of over 37 million highly engaged followers. Ext. Digital also focuses on creating content that prioritizes education and value-add information … not promotion.
To learn more about Ext. Digital’s end-to-end lead generation funnels that also leverage programmatic and native advertising to position you in the right digital spaces, email firstname.lastname@example.org.
– Original blog post by Richard Heft, CEO of Ext. Digital for OTC Markets