The Blog
What do UK investors think, feel and do? The TEA Report
By Louise Ahuja
As part of our mission to support the financial education of Gen Z and foster greater engagement between young investors and companies, we’ve undertaken a detailed examination of the behaviours, preferences, and challenges faced by UK retail investors.
It’s estimated that there are as many as 30 million UK individual investors and our study delivers key insights into the composition of UK retail investors’ portfolios, especially the views of the newest generation of investors, Gen Z, along with their participation in corporate governance, and their communication preferences with the companies in which they invest.
As the results below highlight, there are significant challenges and opportunities for companies aiming to foster better investor relations.
Investment Composition and Engagement
A majority of the surveyed investors (69%) have equity investments, with an average of 19 equity investments per portfolio.
Interestingly, whilst young investors have fewer equity investments compared to most older groups, a higher proportion of their portfolio is invested directly in individual equities (42%), compared to all direct investment in individual equities accounts, which is 36% of the average portfolio. This might suggest a preference for a more hands-on approach, and potentially higher risk investment strategies compared to older investors. The study found that older generations tend to favour diversified funds, with younger investors (18-34 years old) more heavily invested in direct equities.
Notably, Gen Z investors are more likely to have started investing within the last year compared to other age groups, indicating a trend towards earlier financial engagement
Annual General Meetings (AGMs) and Investor Involvement
Our research reveals a low level of engagement in corporate governance, which everyone at TEA would love to see changed.
Over half of investors (55%) have never attended an AGM in person, though online participation is slightly higher with 52% having attended at least one digitally.
The main barriers to attending AGMs include satisfaction with leaving decisions to the board (30%) and scheduling conflicts with work and personal life (26%).
And it seems that companies’ communications with their shareholders need to be significantly improved, with 13% of investors saying they have never been invited to an AGM and 15% have no idea what they should contribute to an AGM.
In addition, one in five investors (22%) feel their holdings are too small to make a difference, rising to 31% of the baby boomer generation, indicating that companies need to do much more to make retail investors feel important.
Get ready for Gen Z investors to be much more active in AGMs
Gen Z investors have a very different outlook on corporate governance and AGMs, with only 17% saying they are happy to leave decisions to the board, compared to 30% of investors across all ages. They are also less likely to say they have personal life clashes with the AGM (17%).
However the big concern is that companies need to make AGM participation more accessible and relevant to younger shareholders. 14% of Gen Z investors are unsure of the role of an AGM and its impact on their investment, and nearly one in five say they have not been invited to the AGM of the companies they are invested in (20%), or know when they are happening (18%).
When asked ‘Which, if any, of the following are barriers to attending company AGMs?’
| Generation | |||||
| Total | Gen Z
(18 to 26) |
Millennial
(27 to 42) |
Gen X
(43 to 58) |
Baby Boomer
(59 to 68) |
|
| I am happy to leave company decisions to the board
|
30% | 17% | 31% | 28% | 33% |
| The timing of the meetings clash with my work / personal life
|
26% | 17% | 27% | 27% | 26% |
| I don’t think my holdings are large enough for it matter
|
22% | 11% | 15% | 24% | 31% |
| They take too long
|
21% | 20% | 23% | 26% | 19% |
| I don’t have much of an opinion
|
17% | 14% | 18% | 18% | 14% |
| I wouldn’t know how to contribute to an AGM
|
15% | 9% | 21% | 16% | 5% |
| I’ve never been invited to one
|
13% | 20% | 19% | 9% | 4% |
| I don’t know when the AGMs are happening
|
11% | 18% | 16% | 8% | 5% |
| I don’t know what they are
|
7% | 14% | 11% | 3% | 1% |
| N/A there are no barriers
|
12% | 27% | 10% | 10% | 12% |
.
Investment Priorities and Information Sources
The TEA ‘mindset of UK investors’ research reveals that investors prioritise high returns (38%) and a thorough knowledge of the company or sector (31%) when choosing their investments.
Companies should take note that retail investors are also wanting transparency (25%) and valuing sustainable products/services (20%).
It’s Millennials who are currently leading the drive in wanting companies to do better
When asked ‘When deciding on which companies to invest in, what is most important to you?’ the table below highlights the answers by generation.
At the moment it is millennial investors who are leading the way in wanting better corporate governance from the companies they invest in:
- 24% of Millennial investors want companies to openly communication with investors (compared to 19% of all investors)
- 26% want companies to provide sustainable products and services (compared to average of 20%)
- 20% want evidence of responsible practices related to ESG (compared to average of 14%)
- 15% want a clear transition plan to becoming a sustainable company (compared to average of 11%)
- And 17% diverse board of directors (compared to only 9% investor average)
| Generation | |||||
| Total | Gen Z
(18 to 26) |
Millennial
(27 to 42) |
Gen X
(43 to 58) |
Baby Boomer
(59 to 68) |
|
| High returns
|
38% | 28% | 37% | 42% | 39% |
| Knowledge of the company / sector
|
31% | 30% | 27% | 37% | 27% |
| The type of industry
|
26% | 18% | 26% | 29% | 24% |
| Transparency
|
25% | 11% | 26% | 28% | 27% |
| Companies I have heard of
|
25% | 27% | 22% | 28% | 20% |
| Sustainable products/services
|
20% | 25% | 26% | 19% | 10% |
| Market volatility
|
19% | 13% | 22% | 19% | 19% |
| Open communication with investors
|
19% | 13% | 24% | 18% | 15% |
| Companies that have products or services I use
|
15% | 20% | 18% | 15% | 9% |
| Evidence of responsible practices related to ESG
|
14% | 8% | 20% | 13% | 9% |
| A clear transition plan to becoming a sustainable company
|
11% | 11% | 15% | 13% | 4% |
| A diverse board of directors
|
9% | 14% | 17% | 8% | 1% |
What sources of information are retail investors using?
The most commonly used sources for retail investor’s investment decisions include independent research providers (33%), annual reports (29%), and investor bulletin boards (24%). Journalist stock recommendations (20%), other investors recommendations, and family and friends are also influential (both 19%).
Companies should take note that social media is as much a source of information for potential investors in their company as their own presentations, with both being used by 14% of investors.
It is also worth noting that different generations of investors use numerous sources of information to make their investment decisions. Looking at the investor results below, companies need to be aware of the different sources of information each generation of investors is using.
When asked ‘What sources of information, if any, do you use to inform your investment decisions?’
| Generation | |||||
| Total | Gen Z
(18 to 26) |
Millennial
(27 to 42) |
Gen X
(43 to 58) |
Baby Boomer
(59 to 68) |
|
| Independent research providers
|
33% | 30% | 32% | 33% | 30% |
| Annual reports
|
29% | 22% | 37% | 27% | 29% |
| Investor bulletin boards
|
24% | 23% | 28% | 30% | 14% |
| Journalist stock recommendations
|
20% | 18% | 24% | 17% | 16% |
| Other investor recommendations
|
19% | 11% | 26% | 20% | 17% |
| Institutional research providers
|
19% | 16% | 26% | 20% | 14% |
| Friends/family
|
17% | 23% | 15% | 19% | 15% |
| Regulatory News Announcements
|
15% | 11% | 16% | 16% | 15% |
| Social media commentary
|
14% | 5% | 27% | 13% | 2% |
| Company presentations
|
14% | 19% | 17% | 15% | 8% |
| Investor associations
|
8% | 9% | 10% | 11% | 4% |
| Investor influencers/social media influencers
|
5% | 6% | 7% | 5% | 2% |
| Other (please specify)
|
3% | 0% | 1% | 3% | 7% |
| N/A I don’t use any sources of information to inform my investment decisions
|
19% | 16% | 8% | 19% | 30% |
Communication Preferences
When asked, what do you want to see from the businesses you invest in when it comes to how they communicate with you? The results show that clear communication is crucial for all investors, with 42% of investors desiring simpler terminology and 40% preferring digital or online interactions. Transparency and open communication are valued by 25% and 19% of investors, respectively.
It is also interesting to note that nearly a quarter of investors (23%) want companies to give them more opportunity to share their voice on the things they care about, this rises to 35% of millennials. In addition, millennials are looking for more personalised content (35%) and more accessible ways of communicating (32%).
When asked ‘What do you want to see from the businesses you invest in when it comes to how they communicate with you?’
| Generation | |||||
| Total | Gen Z
(18 to 26) |
Millennial
(27 to 42) |
Gen X
(43 to 58) |
Baby Boomer
(59 to 68) |
|
| Simple terminology
|
42% | 36% | 39% | 42% | 45% |
| Digital / online communications
|
40% | 30% | 38% | 51% | 39% |
| More personalised content
|
27% | 27% | 35% | 27% | 13% |
| More accessible ways of communicating
|
26% | 30% | 32% | 27% | 12% |
| More opportunity to share my voice on things I care about
|
23% | 29% | 36% | 18% | 7% |
| Diverse spokespeople
|
17% | 21% | 26% | 15% | 4% |
Implications for Better Investor Relations
As we embark on this journey to empower the next generation of investors, we recognise the pivotal role of education, accessibility, and inclusivity in shaping the financial landscape for future generations. Together, let’s pave the way for a financially literate and empowered Gen Z cohort, driving positive change in the UK market and beyond. Join us in championing financial literacy for all, one step at a time.
The Engagement Appeal believes that a more inclusive approach, using cost-effective technology, can provide net benefits for companies that choose to engage with individual investors. Widening companies’ engagement to include individuals, who are increasingly Gen Z and millennial, would also aid with future-proofing and mutual understanding of stakeholder values.
The Engagement Appeal aims to bridge generational investment gaps and advance public welfare through collaborative efforts and the development of digital tools for improved company-investor communication. TEA also provides guidance on enhancing organisational sustainability
At TEA we are calling for companies to help retail investors by :
- Enhance Digital Engagement: Companies should prioritise digital platforms for both dissemination of information and for hosting AGMs to cater to the growing preference for online engagement. This includes using clear, jargon-free language to increase accessibility and understanding. Companies should consider providing resources that demystify investment processes and explaining shareholder rights and benefits in straightforward language.
- Increase Transparency and Openness: As our research highlights, a sizable proportion of the next generation of investors are looking for greater openness from the companies they invest in. Regular updates that are straightforward and informative can help build trust and loyalty. Transparency not only about financials but also about company challenges and ESG practices can align investor values with company operations.
- Facilitate Greater Involvement: Companies could explore ways to make participation in annual general meetings (AGMs) more appealing and feasible for young investors. This needs to start with getting the basics right of ensuring investors know when and how to participate in AGMs. It should also include scheduling meetings outside of typical working hours, offering virtual participation options, and ensuring that young investors feel their contributions are valued. Encouraging smaller investors by showing how their contributions matter could also increase engagement.
- Educate Investors: Our research is clear that providing educational resources about the importance of AGMs and the impact of individual contributions will empower more retail investors to participate. There is a clear need for financial education targeted at young adults to help them overcome barriers to investment. Companies can collaborate with educational institutions or utilize their platforms to provide investment education that covers basic financial concepts, investment strategies, and the benefits of long-term investing. Companies need to make available simple explanations of shareholder rights, the AGM process, and how investors can influence company policy.
- Leverage Varied Communication Channels: Utilizing a mix of communication methods including social media, webinars, and interactive platforms alongside traditional channels like annual reports can cater to different investor preferences and increase overall engagement. Adapting communication styles to suit the preferences of younger investors can improve engagement. This includes using clear, concise language and exploring new forms of digital media to disseminate information, such as podcasts, webinars, and interactive tools.
- Promoting Ethical and Responsible Investing: With a growing interest in socially responsible and ethical investment options among young people, companies should highlight their commitments to sustainability and ethical practices. Transparency about these efforts can attract Gen Z investors who prefer to invest in companies that reflect their values. By addressing these areas, companies can not only enhance their relationships with young investors but also tap into a demographic that is likely to gain significant financial influence in the coming years. This strategic focus on Gen Z could help firms build a loyal investor base that will grow as these investors mature and potentially increase their investment activities.
In a world where financial literacy remains a pressing issue, especially for younger generations, empowering Gen Z in finance is not just a necessity but a strategic imperative.
By adopting these strategies, companies can not only improve their investor relations but also potentially increase investor satisfaction and attract a broader investor base. The insights from the TEA Mindset of UK Investors report highlight the changing dynamics and growing expectations of retail investors in the UK.
The “TEA Retail Investor Tracker” conducted by Opinium Research in November 2023 among a sample of 1,000 UK retail investors and sample of 2,000 UK adults, nationally representative of the UK population. The research, conducted via online surveys, provides a detailed examination of the behaviours, preferences, and challenges faced by these groups.
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