When I first began buying and holding shares, there were no investment platforms. 50 years ago — and yes, alas, it was that long ago — Hargreaves Lansdown, AJ Bell, Interactive Investor and the like simply hadn’t been invented.
Full-service stockbrokers, and banks, were pretty much the only option. Real-time pricing? Or even near real-time pricing? You could pretty much forget it.
And as far as ordinary investors like you and I are concerned, I’m convinced that investment platforms have been a huge force for good.
Here be dragons
Back then, buying shares was expensive — I have no record of trading costs back in the early 1970s, but I’m looking at a dealing note from 1993, noting a commission of £31 for a £1,000 share purchase. What you got was a share certificate, which it was important not to lose.
Dividends were paid by cheque, requiring you to queue at the bank to pay them in.
And stockbrokers — frankly — were a bit off-putting, and most ordinary folk had no idea how to go about dealing with one. Consequently, most people didn’t.
Banks were more familiar, but one needed to visit during banking hours to trade. And by ‘trade’ I mean signing a form to instruct them to buy shares, or handing over a share certificate and signing another form. And, as I say, forget real-time pricing.
Rightly, investment platforms such as Hargreaves Lansdown — which claims 1.7 million clients — have been credited with democratising investing.
Thud, thud: something heavy this way comes
But there’s one important way in which, in my view, investment platforms don’t democratise investing.
Sure, they enable investors to buy and sell at the click of a keyboard, 24 hours a day. Sure, they provide oodles of free information about shares and funds: yield, P/E ratios, price data, dividend histories, core financial data, and so on. And sure, there’s page after page after page of user-friendly educational materials.
The exception is company reports. Years ago, they used to arrive in the post: big fat envelopes, thudding on the doormat. If you held a share certificate, you got company reports — and with them, cards to vote on shareholder resolutions, and invitations to company annual general meetings.
All of which very largely doesn’t — or at least didn’t — happen with investment platforms.
Do-able? Yes. Investor-friendly? No.
Now, let’s be clear. It would be wrong of me to say that the large investment platforms are disenfranchising ordinary investors — even though last year, consumer rights champions Which? used that very word.
But you have to go looking for annual reports, and then download them, and then read them. And many people don’t. You can register to vote — but the process has traditionally, when offered, been cumbersome and awkward. And most investors haven’t bothered, even if they knew it was possible. And while it is often possible to attend company meetings, the same comments apply.
Consequently, actual shareholder participation is low. Quoting research by shareholder group ShareSoc, Which? reckons that just 1% of ordinary shareholders vote. (And that includes those holding share certificates, who return those cards.)
So two recent developments are to be lauded.
Platforms get the message
First, investment platforms — or at least some of them — are starting to make shareholder participation easier.
Last year, Interactive Investor — the UK’s second-largest platform — changed its systems so as to automatically opt all of its clients into its voting and information service.
You don’t have to vote, but you can if you want.
And Hargreaves Lansdown — the UK’s largest platform — has this year made its existing shareholder voting process easier to use, by developing an online service specifically to handle it.
Both brokerages, in my view, are to be commended.
You don’t invest through those particular platforms? Not to worry: that Which? article contains a handy table, detailing the situation at several others.
But what about company meetings themselves? These are more problematic for many investors — unless your holding in a company is worth many thousands of pounds, London-based meetings are not very feasible for investors in the regions.
(Granted, not all meetings are in London, but you get my point. And even worse are meetings held in the Channel Islands.)
Yet here, too, help is at hand. Lumi, a firm which manages investor meetings for most of the Footsie, reports a growing number of meetings now being held in hybrid format — that is, in-person and virtually. Globally, around a third of investor meetings are now hybrid.
And it’s not only investors who benefit, notes Lumi. Companies see benefits in terms of more attendees, more questions during meetings, and the opportunity to access investor viewpoints that they might otherwise not hear.
Again, this is a development to be applauded.
All in all, it’s a far cry from 1973, when I first went on a company’s shareholder register. (Westland Helicopters Ltd, in case you were wondering.)
As I say, investment platforms have transformed investing, and removed much of the trading ‘friction’ that reduced the likelihood of ordinary investors engaging with the stock market to build wealth. They’ve been a huge force for good.
But that engagement is a two-way process: having all these individual shareholders on the shareholder register — albeit by proxy — brings responsibilities in terms of communication and investor democracy.
It’s been a while, but it’s good to see that progress is being made.