No buffets needed: Today’s investor is more savvy, more challenging for companies to engage

MANO Sabnani owns shares in many of the companies listed on the Singapore Exchange (SGX), and he attends a number of annual general meetings (AGMs) each year to keep himself updated on his investments. 

So, he was not happy when some companies insisted on holding electronic AGMs even after the Covid-19 pandemic eased. 

“To me, (these companies) show that they are not interested in engaging shareholders. I think that’s a bad sign,” Sabnani tells The Business Times (BT).

“The attitude (of companies) is very important, because if they are not interested in you, then why are you interested in them and putting your capital there?”

Rabbani Rosli, a 26-year-old IT executive, is far more ambivalent.

Attendance at an AGM should only be necessary if a company is running into problems, he says. He invests in what he deems “safe stocks”, so that he does not have to keep a close eye on his investments.

“Young investors probably own…shares in small quantities, and they wouldn’t have much to say even if they did attend AGMs,” he adds.

Shareholders who side with Sabnani are probably happy that listed companies must now revert to physical meetings as a default.

At the same time, investing behaviours and approaches are changing – partly in response to technology, and partly because the market is maturing.

A growing cohort of investors such as Rosli looks for convenience and takes a light-touch approach to portfolio management, and these investors are changing the ways companies and market participants think about shareholder engagement.

Differing perspectives could make it more difficult for companies to please shareholders.

Virtual meetings are one example. As the default option over the course of the pandemic, they drew praise from some shareholders and brickbats from others.

Fans of the new setup enjoyed being able to tune in to a call from a desk at home, or at work. Virtual meetings are also a better option for shareholders with accessibility challenges. Others like Sabnani, however, miss the interaction.

“Shareholders submit their questions in advance, and send their votes or proxy forms in advance,” he says. “Such AGMs are a dead loss, there’s no point attending them.”

His gripes with electronic AGMs include companies “reading from an agenda”. Sometimes, when he sends questions to a company, he says he is unable to recognise them when they are answered at the meetings. 

“They have modified it to their own way,” he says. He also reckons shareholders should have the opportunity to ask executives of a company questions before voting on issues. 

“I’ve stopped attending electronic AGMs because they are just a waste of time,” he notes. 

On top of format changes, AGMs are also smaller affairs today. Few companies still host buffets or hand out door gifts.

On Jun 27, Singtel announced that it would not be distributing “any vouchers or door gifts” at its wholly physical AGM on Jul 28. 

Changing strategies

Meetings are not the only part of the investment experience that are significantly altered. How investors buy shares, chart their performance, vote, or respond to corporate actions has changed. The types of investments that are most popular have also evolved.

Take, for instance, Abigail, an investor in her 20s who does not invest in individual stocks. “(AGMs) might be valuable for more active investors and shareholders of the companies,” says Abigail, who declined to give her last name.

She prefers local and global exchange-traded funds (ETFs), as she thinks this strategy can reap “decent returns in the long term”. She also does not have to follow the performance of individual companies.

Janice Kan, SGX’s head of markets for equities, says that as investors get more sophisticated, they will be looking for products that are “not so traditional” – including ETFs.

SGX has been looking at introducing additional leveraged instruments to broaden the range of products available to investors.

These are typically available only to high-net-worth investors, through banks.

Investors have also been looking for investment opportunities beyond Singapore, and SGX is working on ways to make this easier for investors.

“One of the things that we are working very closely on is to bring a more diversified type of exposure into our Singapore market,” Kan remarks.

Since May 30, retail investors in Singapore have been able to buy and sell Singapore Depository Receipts of three Thai blue-chip companies.

“This is one of the ways in which we can bring more instruments or more exposure to the Singapore market, in order to cater to investors looking for broader exposure beyond just Singapore-listed companies,” she points out. 

“By bringing foreign exposure instruments into Singapore, we allow investors to trade everything in one place, rather than to go through multiple brokers and enter different markets in different time zones.”

SGX’s equities segment has also “caught on” to trends such as robo advisers and digitalisation quickly, adapted its processes and worked with other external stakeholders to grow its reach, says Kan.

Self-serve mentality

To some extent, the increasing maturity and sophistication of investors have also fostered a self-serve attitude in the industry.

Robo advisers that automatically recommend investment options based on specified criteria are one visible example of this.

Another is the way in which listed companies communicate with shareholders and facilitate their votes.

Physical annual reports have long since disappeared, but companies increasingly also do not send hard copies of proxy forms either.

For remisiers, the rise of the self-serve investor has resulted in the slow death of a profession.

S Nallakaruppan, president of the Society of Remisiers, says stockbroking was one of the “top professions” in the 90s – a period he describes as the profession’s “heyday”.

Remisiers would share their knowledge of stocks with clients, discuss potential investments with them, and take on the credit risks of the transaction until the trade was settled. 

Online brokerages have since removed the need for human intermediaries in stock trading. Investors also have more ways to educate themselves on companies, including blogs, publicly available analyst reports and even YouTube channels.

A spokesperson for the Monetary Authority of Singapore says it “does not publish figures on the total number of representatives in the local financial industry”.

Nallakaruppan believes there may have been about 5,000 remisiers in Singapore at the time; there are probably around 2,000 now, he says.

The secretariat of the Society of Remisiers, an organisation for remisiers, estimated it had about 800 members in the 90s with an average age in the 30s. Today, membership is about 400 and the average age is in the 50s.

Wages have also declined, Nallakaruppan says. “What I used to make in a day, I now struggle to make in a month.”

He estimates that a remisier today typically takes home less than S$2,000 each month. He manages a boutique fund on the side to make ends meet, and says most other remisiers would have other sources of income – a second job, perhaps, or rental from a property.

Nallakaruppan says some who have traded with remisiers for a long time continue to do so, but noted that younger investors are more “cost conscious” and technologically savvy enough to source for information on their own.

Dennis Khoo, former group head of UOB’s digital bank TMRW, compares remisiers to travel agents three decades ago. Both professions have been “hollowed out by technology and direct access to the markets”.   

“Today, (investors) can go online and invest directly in the market. They don’t have to pay for remisiers’ services because the Internet has the ability to provide you with these things,” he says. 

Khoo argues that there is also a wealth of information in stock markets today, and investors are able to do their own research and identify opportunities to buy a stock. Technology and digitalisation have also made investing in the Singapore stock market “more affordable and accessible”. 

Adapting and evolving

Instead of fighting against the changing market, Nallakaruppan believes remisiers must “upskill and evolve” in order to “move up the value chain” – becoming wealth managers or boutique fund managers.

“We can then translate this wealth of experience for the benefit of our clients,” he says. “If (remisiers) can provide a better value proposition for their clients, then the digitisation of the industry will not be a (threat) because they can provide… value-added services.”

Companies, meanwhile, have to work out new ways of engaging shareholders.

Christopher Wong, head of assurance for Singapore at Ernst & Young, comments that investors today are “a lot more sophisticated”. They are better able to understand a company’s business and its underlying risks and rewards, and also able to read a company’s financials more critically, he says.

“Hence, their priorities will include the sustainability of the business performance and yields, the quality of the management team as well as corporate governance from the board. There is also greater consciousness on the diversification of investment portfolio.”  

Jason U, managing director for BoardRoom’s share registry services and employee plans services in Asia, says digitalisation efforts and initiatives related to environment, social and corporate governance considerations will be key priorities in the near term for capital market participants.

“It will be interesting to observe how the convergence of digital technologies such as artificial intelligence will transform and revolutionise the way retail investors engage with and access capital markets,” he adds.

“There is potential for retail investors to access personalised insights, make better-informed decisions, and be more engaged in the investment process.”

Singapore-listed Azeus Systems, which provides IT solutions and products that are used in virtual or hybrid AGMs, notes that companies are becoming more adept with virtual meeting formats.

The company says that AGMs were “relatively shorter in duration” at the beginning of the pandemic, with no shareholder interactions. This changed over time as SGX Regulation required live engagement and voting at such virtual meetings.

“AGMs that do not allow interactions offer little value to investors,” says a spokesperson, while also noting that large turnouts at physical meetings do not necessarily mean shareholders have more opportunities to interact with the company. 

“There are some observations of attendees arriving at the venue with minimal shareholder interaction, limiting their experience to just the freebies and vouchers. More meaningful interactions between the company and their investors should be the goal. And hybrid meetings, which give the best of both worlds, allow investors of every demographic the opportunity to do so.”

Even as some companies hold back on vouchers and freebies, the Azeus spokesperson says this is not necessarily a bad thing. 

“The fundamental purpose of AGMs is to accord shareholders the right to interact with the board and management of the company, and exercise their right to vote.”

Sabnani notes that several companies have gone out of their way to engage shareholders differently.

Conglomerate CapitaLand Investment, for one, has been reaching out to shareholders to organise pre-AGM sessions, which he says are useful to shareholders who want a bit more information or clarity on things like a company’s financial performance. Other good examples he highlighted are Boustead Singapore, Fraser and Neave, and Olam. 

While institutional shareholders such as asset managers have the firepower to demand a conversation with a company’s top-ranking executives, Sabnani says retail shareholders do not have that luxury.

He is waiting to see what changes are coming for the next batch of AGMs. Apart from physical meetings, he is looking forward to senior management encouraging questions and answering them, and giving shareholders the opportunity to interact with the company into which they put their money.