Buy side, sell side and investor relations: Strengthening the triangle

The role of the investor relations professional changed dramatically in the wake of the 2007 financial crisis. Once focused primarily on communications, modern IR professionals must now juggle an increasingly complex set of responsibilities related to both regulation and technology. The dramatic change in the role of investor relations was the subject of a panel discussion, hosted by Bloomberg and NIRI New York.

This shift has also changed their relationship with the buy side and sell side, prompting them to look for new ways to work with their counterparts in those areas to increase efficiency and power growth for their organizations.

Finding new ways to cooperate

Modern IR professionals are actively cultivating mutually beneficial relationships with analysts. “From an IRO’s perspective, it’s really viewing the buy/sell sides as partners, and not as adversaries,” says Alan Katz, vice president of investor relations at Covanta.

There’s an increased emphasis on providing open communication to analysts in a timely manner. “To respond in two to three days is no longer acceptable,” says Darin Arita, senior vice president of Voya Financial. IROs must be able to analyze and interpret market dynamics and strategically communicate this insight to analysts. To this end, IR professionals are also expected to have a thorough understanding of their businesses, beyond high-level financials. A deep knowledge of the company’s capital structure and market data will boost the IROs credibility with the buy and sell side colleagues.

Rethinking the earnings call

The earnings call is a staple of investor relationships, but IR professionals agree that it could use some fresh thinking beyond the traditional one-hour call with prepared remarks and a Q&A session. One idea gaining traction: Make the calls shorter. Some companies are paring them down to 45 minutes. This doesn’t mean they are withholding vital information on the call. Instead, they are minimizing any time spent bragging and boasting and letting the news release do the heavy lifting for sharing data.

Closer cooperation with the sell side can be a big help here, if you reach out to them beforehand. “We proactively schedule calls [with the sell side], after the press release but before call,” Katz says. “This gives us a chance to tweak the script and clarify if needed. We can prepare by better understanding the types of questions people will ask.”

The buy side can be particularly helpful after the call. IR professionals should schedule time with the buy side directly after the earnings call, giving them time to talk through whatever questions the information may have raised.

Choose the right channels for outreach

There isn’t one tool that can do everything for investor relations. Smart IR professionals understand what the Street needs from their businesses at that particular time and tailors their approach accordingly.

More than half of public companies hold regular analyst or investor days, according to research by IR Magazine, NIRI and others, but many companies are rethinking even this staple event.

Instead of the big annual investor day, some companies are hosting analyst days or small group events as alternatives. “Rather than this big event that takes a lot of time and costs a lot of money, just do a smaller event,” Arita said. “Spend a few hours with them.”