Investor trust in actionInvestor trust in action

Great investor relations can build connection and trust at scale, even during times of upheaval and unpredictability. But when we’re communicating with a broad audience, our message has to be relevant to a range of investors with varying interests and priorities. To earn trust with investors, we must engage with them on their own terms, be clear and purposeful in our communications, and make our shareholders feel seen and heard.

I realise that ‘build connection and trust’ might sound desirable, but it doesn’t give any indication of how to apply that advice. So let’s get into the real detail of how successful companies are doing this in practice. Here, I’ll lay out how to build a durable investor brand by putting trust into action.

The investor TRUST model

Strong relations with investors are built on trust, as in any lasting relationship, professional or otherwise. 

Our team has developed a proprietary framework for building investor trust, handily summarised by the acronym "TRUST". Here’s the framework in action:

• Transparent: Remain candid and open. Share the good and explain how you’re managing the bad. Consider additional, voluntary reporting or sharing longer-term targets. Most importantly, clearly explain how you’re planning to get there.

• Reliable: Be reliable and consistent in your messaging. Tell investors what you’re going to do, do it, and tell them what you’ve done. The best companies become predictable, and their valuations adjust accordingly.

• Understandable: Keep communication simple even for sophisticated investors (more on that later).

• Strategic: Keep the focus on the long-term vision, not allowing short-term priorities and anomalies to derail your overall message. Help investors understand how each result rolls up to the strategy.

• Tandem: Actively engaging with investors and being open to feedback. Take our client, Turners Auto. CEO Todd Hunter personally responds to investor queries on forums and via emails, making even smaller shareholders feel heard and valued. At the same time, via our perception studies and 1:1 feedback, Todd values insights from leading sell-side analysts and institutional investors, which can sometimes even enhance the direction of the business.

Leadership's role in IR

CEOs need to excel at communicating with investors. Like most skills, this is something that can be learned and honed with coaching. While the CEO should articulate the company’s broader investor messaging, they don’t have to become an expert in every aspect of Investor Relations. Their role is to convey the confidence needed to attract and retain investors and proactively acknowledge challenges. Other executives should also be briefed and coached on the same talking points, to ensure a consistent message.

NZX-listed CEOs and CFOs are beginning to take a more active part in amplifying messaging to their investor base. The C-suite is increasingly prioritising investor relations and recognising how visible and accessible leaders can strengthen connections with shareholders, who often overlap with their market.

In action:

• Seek the counsel of experienced capital markets practitioners.

• The CEO can take the lead on telling the company story, strategy and vision, while delegating to others for more detailed information. 

• “Show off your bench” at appropriate times (most notably, investor days). Investors welcome hearing from other senior executives.

Transparency during tough times

We often advise companies facing turmoil and working to rebuild trust, and we’ve seen how transparency matters even more during challenging times. Long-term investors, rather than shrinking from adversity, will often appreciate head-on honesty and a clear understanding of the company's plan to mitigate risks.

Scott Scoullar is CEO of Summerset, another of our clients. Scott showed an effective example of this during the initial stages of the COVID-19 pandemic. The market was in a panic, particularly given the vulnerable nature of residents, and Scott sprung into action to calmly address shareholders on Zoom. He fully acknowledged the seriousness of the situation, sharing what was known and not known, and outlining the approach to protect residents and what business and financial levers were available. 

Investors are not naive. They understand that bad things happen, but they want to know that leadership is confronting difficulties head-on and have a plan to adapt. 

In action:

• Nasty surprises, or worse, progressive downgrades can severely damage investor confidence.

• Share bad news at the first opportunity. You must get ahead of it, front up and own the delivery of that news.

• Acknowledge adversity first, and then outline what is within your control and the action you are taking.

• It’s often darkest before dawn. Close out communications, calls, or addresses on a positive note as a reminder of the light at the end of the tunnel.

Meet investors where they’re at

Investor relations has a role in how investors perceive the business, whether they’re current or potential, whether they’re an experienced fund manager or a parent investing on behalf of their child. While your overarching story should be consistent, you need to create space for different investor needs and priorities. Retail investors are often also customers or employees, creating an intersection of interests and making them multifaceted stakeholders. Structure your investor communications to let each audience engage on their own terms—whether that’s retail investors, institutions, or analysts.

In action:

• Use appendices in investor presentations to provide the details required by sell-side analysts while keeping the main story central and accessible to all stakeholders. 

• Front-load key narrative elements in the first paragraphs or pages of a report or release, instead of immediately diving into technical details. This also helps busy professional investors.

• Restate the nature and purpose of your business at the beginning of key communications to establish your identity with retail investors trying to get a sense of who you are.

Embrace new channels 

With the continued shift away from traditional media, we need to explore new media to connect with investors, present and potential. Channels like podcasts, video profiles and LinkedIn can offer a more immediate sense of connection to the investor and provide cost-effective and impressive reach. These  initiatives offer efficient platforms to build trust at scale.

That being said, some touchpoints are irreplaceable. Investor days and roadshows remain uniquely useful, particularly for institutional shareholders, as an opportunity to showcase the broader talent within the organisation beyond just the CEO and CFO.

In action:

• Experiment with LinkedIn, podcasts, or relevant YouTube channels for investor relations.

• You may want to consider guidance from a specialist consultant in this evolving space. 

• In-person investor days and 1:1 roadshows remain important and relevant, particularly for demonstrating a depth of expertise across the organisation.

Forecast, but stay flexible

When providing earnings guidance, consider the "Cone of Uncertainty” model. Imagine a cone tilted horizontally. Start with a wider range—the base of the cone—and tighten it over the 12-month period leading up to earnings season—the tip. 

Too often, we see companies start too wide and have to update the market too frequently. The start of the fiscal year, by definition, is the least known for everybody, including the issuer. Over that period, you should have access to more information and more precise projections. Above all, the market doesn’t like surprises, so try to avoid being backed into a disclosure corner due to unexpected developments. 

The size of the base range will depend on the nature of the business, and not all issuers should give guidance. Finally, consider giving guidance three to six months into the year if it’s unhelpful to do so at the beginning. Guidance is optional, so do it on your own terms.

Consider going further with your financial forecasting. Turners Auto proactively publishes medium-range estimates to provide investors with a clear understanding of their long-term goals. It doesn’t mean that you’re irrevocably committed to meeting these long-term projections—if circumstances change, simply update the market in line with new information. Investors will appreciate the chance to quantify your ambitions and understand where you're going, including any adjustments along the way—as long as you communicate clearly and proactively.

In action:

• Give yourself leeway in early earnings projections, but work to refine your forecast as you gather more data.

• Share developments and reassessments as early as possible. Your final numbers should not come as a surprise. And get ahead of “confession season”, the month before results, which can appear clumsy or out of control, and further spook investors.

• Whilst not right for everyone, consider issuing 3-5 year forecasts as a framework for your vision, allowing for updates if circumstances change.

Final thoughts

Essentially, building a strong investor brand requires a people-first approach. By consistently applying our investor TRUST model—being transparent, reliable, understandable, strategic, and working in tandem with investors, companies can overcome challenges and win loyalty. Continuity and a commitment to open communication builds lasting trust with all shareholders, large and small.