Retail investors should get more access to IPOs as part of a major educational and cultural shift among the public’s investing attitudes, the Wealth Management Association says.
WMA chief executive Liz Field says retail investors should invest for the long term and should be participants, not spectators, of investments, taking active views on the stocks and shares of the companies they invest in.
“That’s our call, to have greater retail participation in IPOs, and we need to reinforce the retail investors’ participation, particularly in those companies that are in retail-friendly environments. It is part of their brand too to have members of the public who are shareholders in their companies, making them their ambassadors,” says Field.
“This is a message for corporates when going to the market to make shares available not only to institutions,” she adds.
The government could lead the way, she says, with any future selloff of RBS.
“If in the budget they are announcing an RBS selloff then we would want to see a much greater amount being available for retail investors. The last Royal Mail selloff wasn’t open to retail investors… but RBS is in the public domain, people know about it so they want to be participants in its future growth and they will do that being shareholders.”
The WMA has already put work into opening up the bond markets to retail investors.
It recently responded to a review of European rules on the prospectuses for bond issues, proposing several changes.
Under the current regime, corporate bond issuance above €100,000 (£74,000) come with a wholesale prospectus, but anything smaller must be issued with a much heavier and costly retail prospectus.
The trade body has proposed that this denomination limit should be abolished so that there is a single retail and wholesale market for plain vanilla corporate bonds in the EU, making it more accessible for wealth managers and their clients.
Field, who has been at the helm of the trade body for over six months after replacing Tim May, added that there is a strong financial educational need among investors and potential investors.
The chief executive also says there is a lack of basic investor communication and that many organisations need “to take some responsibility for that”, while the government should also promote a “cultural shift”.
Field says: “We haven’t been brought up with the education of investing in companies. It is not normally the sort of things they talk to you in schools.
“There is also a lack of understanding that when you invest in something you do it for the longer term, so if you see the market crashing that’s not the time to sell.”