The new faces of investor influence

Instead of the old career route to Investor Relations, professionals are coming from financial services areas, such as equity research and corporate finance.

No doubt heightened by one of the worst downturns in global history, company financial and operational performance is being scrutinised in greater detail by the public, the press, regulators, politicians and investors.

Why does IR matter?
This new dynamic is heightening the importance of Investor Relations (IR) executives for companies seeking greater strategic input, financial acumen, technical skills and broader experience.

People and organisational advisory firm Korn Ferry believes the variety of career paths to reach the position of head of IR is growing. New IR executives are coming from financial services areas, such as equity research and corporate finance.

Who are the new players?
In a recent survey of IR heads, Korn Ferry found that 47% had worked in more than one industry, with a third having prior experience in investment banking and a quarter qualified as chartered accountants.

All respondents said their business placed a “high” or “moderate” value on the IR function and that they were viewed as a “vital member of the executive team”.

An asset to the CFO
Chair of the Investor Relations Society (IRS), Sue Scholes, says: “More boards see IR as value enhancing; it is not just about arranging meetings with investors anymore. People need to be skilled in finance as well as communications and marketing,” she says.

“At the same time the sell-side work of analysts has become less exciting, which has made IR work look more interesting. There are a lot more questions over transparency and pricing of corporate access and research as well as a fear that the role they used to do no longer exists.”

She believes the downturn has also helped heighten the importance of the IR function. “When things go bad, those in IR need to ensure that your company is seen to have a good reputation in the marketplace. You have to ensure that investors understand your strategy and your valuation,” she says.

Overcoming challenges
Partner and head of the CFO Practice at recruitment group Odgers Berndtson, Mark Freebairn, remains sceptical about whether anything has changed in the market with an analyst’s lack of corporate experience still an obvious challenge for individuals and companies to overcome.

“There has always been a debate about whether it is best to hire someone who knows the market and can be a poacher turned gamekeeper, or to identify someone already within your organisation and train them up to be an IR officer. You are seeing more active investors, hedge funds being more aggressive and short-selling so there are definitely scenarios where an analyst’s skillset and their knowledge of the market would fill the role better,” he says.

There have been concerns that, despite being able to understand investors, analysts might struggle with tactfully coaching fellow executives and disseminating vital information.

Future solutions
The IRS has identified the need to improve qualifications in the sector. It already has an IRS Certificate in Investor Relations and an International Certificate, which demonstrates competency in the function. Candidates have to demonstrate their knowledge of the financial and market environment, the regulatory and reporting requirements for listed companies, and their sound understanding of the principles of investor relations. To date, there have been 1,000 successful candidates from more than 25 countries.

Top tips
The IR function is rising in importance as a result of the economic downturn and more activist investors. So it is vital that you look to upskill your IR team.

  • Look externally particularly at analysts or corporate brokers in your industry sector. They may have the financial acumen and contacts you need to be the ideal bridge between your business and the City
  • Upskill your existing employees to move into the IR function. They could come from your financial departments or elsewhere such as marketing
  • Investigate the qualifications being offered by the Investor Relations Society
  • Remember that, by improving the effectiveness of the IR function, you can ease some of the burden on your chief financial officer and free him or her to do more strategic work