The Blog

Gen Z are Reshaping the Market: The Rise of Retail and the Urgency for Company Engagement

Retail trading has come a long way from days of reading newspapers and calling brokers. Digital transformation and the COVID-19 pandemic have ushered in a new era, attracting a diverse cohort of traders.  

The recent rise of Gen Z retail investors, fuelled by events like the GameStop frenzy, has reshaped the investment world, with over $20 trillion in assets across 100 million retail investment accounts in the US.  

Suddenly, retail investors have a level of power and influence at levels not seen before. But, this is largely untapped. 

According to a recent article in the Economist, Gen Z is unprecedentedly wealthy, richer than both Millennials and Baby-Boomers were at this stage of their lives. In the ‘rich’ world, there are at least 250m Gen Z-ers. And according to research from the CFA Institute, half (49%) of Gen Z in the UK are investors, with 81% of those having started investing before the age of 21.  

This generation is starting to throw their weight around, yet there is a disconnect between the financial power of Gen Z and the extent to which companies take them seriously as an investor base.  

Companies Are Missing a Trick

Considering this significant shift in the investor landscape, a concerning majority of listed companies have their mindsets stuck in the past, debating whether they want or need retail investors, if they should proactively engage, and what the cost vs. benefit of having a retail investor base is.  

Mainstream Investor Relations (IR) teams tend to still consider retail investors as being a “long tail of hard-to-reach investors” and hence they focus their attention on institutions rather than individuals.  

Companies that don’t actively engage with this new wave of investors risk missing out. Not just on capital, but advocacy and consumer support as well.  

The power of social media, online forums, and now, investment platforms, cannot be underestimated as breeding-grounds for active discussion and debate around investment opportunities. With the technologies available today it’s more than possible to actively engage with individual investors and IR need to modernise their approach. For smaller listed companies with liquidity issues (low volumes of shares being traded) more proactive engagement with retail shareholders can promote liquidity and reduce share price volatility accordingly. 

Online Communities Are Bubbling with Debate and Discussion

As part of her AGM Odyssey, TEA CEO, Sheryl Cuisia, has amassed investments in over 700 UK companies, making purchases through various platforms, including Interactive Investor, Trading 212, eToro and Robinhood.  

Her strategic approach reflects a blend of traditional and modern investment avenues – very similar to the trends we’re seeing amongst Gen Z investors. Her foray into cryptocurrencies, leveraging platforms like Binance, as well as investing in UK and US listed companies has revealed some fascinating insights around the approach taken by different platforms. 

When comparing some of the more traditional UK platforms to the more modern and globally orientated, like Trading 212 and eToro, it’s clear to see that the latter have cottoned on to the fact that there’s been an explosion in investing amongst the younger generation, harnessing this interest and desire to connect with other investors in their own communities. These platforms are doing a brilliant job of encouraging conversation and discussion, offering a truly democratic space.  

The success of this approach is reflected in the numbers, with Trading 212 having over 2.5 million customers in the UK and Europe and eToro having over 35 million worldwide.  

Companies need to take note of the conversations and activities happening on these platforms and understand the desire of this generation to engage. They need to recognise the growing power of retail investors and quickly modernise their approach to effectively engage this new generation.  

However, there’s also an aspect of give and take. Companies will eventually work their way towards the digital platforms, where investors spend much of our time, but in the meantime, attending AGMs and engaging with companies through more official communications channels is the way to get investor voices heard. By turning up to AGMs and engaging, younger investors can make themselves seen, voice concerns and encourage proactive communication.  

Our mission at The Engagement Appeal is to bring the worlds of the company and the investor together. We have been engaging with companies by attending AGMs and talking about investor engagement. We’re encouraged by the level of engagement in these conversations and will work tirelessly to push this forward to create a transformation in the market.  

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