While recent changes in the economic landscape have dampened growth, studies show an increased interest in wealth creation over the past few years, particularly in younger generations.
Fintech has allowed more access to investing tools, but the space can still be daunting, and many are looking for tools to understand more. Statista found that in the U.S., almost 80% of GenZ were interested in learning about investment, compared to 60% of GenX.
While the difference in experience due to age may be a factor, studies also show younger generations started investing much earlier than their older counterparts.
Understanding the influence stakeholders can make on brand policies is an area that is still shrouded in mystery for some.
Voting to influence company focus
The idea of “influencing with your dollars” i.e., investing in causes that align with investor ideals – has already been ingrained into many people’s understanding. However, retail investors’ voting power to influence company policies is often overlooked.
“The common misconception is, ‘I have one vote. Why does that matter?'” said Daniel Naim, Founder and CEO of investment app Fennel. “It turns out retail investors actually determine a majority of which way the votes are going to go.”
He explained that many investors who don’t engage with company votes pass their votes to their brokerage. The largest brokerages have a significant influence on the companies they invest in. However, small funds can also make an impact.
“You don’t need large groups of people to make a change. You can create a small boat that can create big waves. A prime example is a small hedge fund called Engine Number One. They had $50 million under management. They took a fraction of that they invested in Exxon Mobil, and they said, we want to replace four of the 12 board seats of Exxon Mobil to reduce carbon emission. And they actually got Blackrock to support them to pass the measure.”
“If you look at the history for a majority of votes that retail investors do get involved in, they swing the vote, and they always pass the vote against management. So they have a high impact. If you start to look more holistically at ETF involvement and single shares, it matters. And it matters even more for smaller companies.”
Ironically, these votes may be in areas younger investors would like to engage. McKinsey’s report on generational differences in engagement with brands showed that younger consumers are heavily influenced by the causes and policies upheld by companies.
“If you look at some of these votes, they’re things that are quite important to younger generations,” continued Naim. “Particularly, it’s things like, should Apple report on forced labor practices? Should Starbucks report on its union-busting stuff? Should Apple CEO get paid XYZ? Do you approve of this carbon emission?”
“All the issues that our generation existentially struggles with and wants to have an impact, it turns out, that you can have an impact and put pressure on public companies, and they listen to their stock price the most.”
Power through information
While Fennel provides the tools to make investment accessible to consumers, they also help keep investors informed of voting opportunities.
“It’s like, these large public companies and financial institutions don’t want the average person to know that this mode of communication is possible because it terrifies them,” said Naim. “So if you can even just show a little attention to it, it can make a big impact.”
“We want to inform the users that these things are happening, that the power is in their hands, and create better tools to make that process easier for them.”
He explained that users could pick the values that mean most to them, building up a portfolio of aligned investments. In addition, they can set their stance on company votes based on these values.
“You don’t have to read the whole document if you don’t want to,” he said. “You can say essentially, I care about climate, make sure anytime there’s a climate vote, vote me in favor.”
Fennel also collates hundreds of data points to provide in-depth insights into the companies, helping investors keep up to date with the operations of their investments.
“We think that there’s tremendous power in the stock market. And all we have to do is have the everyday person, the retail investor, join that conversation and tell these large financial institutions; actually, these things matter.”