The New Face of Wall Street
Individual investors and family offices are becoming powerful players in the stock market. Why firms can no longer ignore them.
In Silicon Valley, an early employee of a Big Tech company who now leads his family’s investment office meets with a wealth adviser about a new opportunity. Across the country, in Manhattan, a purchase by a group of day traders has bumped up a stock’s price enough to attract the notice of the company’s investor-relations team.
Welcome to the new face of Wall Street. Individual investors and investment offices of independently wealthy families are becoming a bigger part of the market, and in process changing the nature of investor relations for firms. Data shows that retail traders—people who buy individual stocks as opposed to institutional investors who buy funds and funds of funds—now hold $12 trillion worth of stocks, about 20% of market trading volume, up from 15% a decade ago. For their part, data shows that family offices will manage about $5.4 trillion in as-sets by 2030, surpassing hedge funds as a class. “It’s a significant shift in the market,” says Peter McDermott, head of the Corporate Affairs and Investor Relations practice at Korn Ferry. “All eyes are on it now.”
To be sure—and as a dramatic, social media-driven rise in stocks recently demonstrated—retail traders can impact a firm as much as professional investors can. Moreover, while retail investors have historically been considered “dumb money” (i.e., lacking the sophistication of professional investors) that perception isn’t entirely accurate. Data shows that stocks held primarily by retail investors are beating the S&P 500. “A large, digital-savvy retail investor base can move quickly, form opinions publicly, and influence narratives in a way that can impact a firm’s stock,” says Beau Lambert, a senior client partner in the Financial Officers practice at Korn Ferry. “You didn’t see that a decade ago.”
At the same time, Lambert says, family offices have been transformed: Formerly small, conservative, wealth-preserving vehicles, they’ve evolved into “a much more sophisticated and influential pool of capital, often behaving less like passive investors and more like patient owners.”
The combined power and differing objectives of retail investors and family offices have prompted firms to rethink their investor-relations strategies and messaging, says McDermott. It used to be that firms could focus on large institutional investors and assume the rest of the market would follow. “That’s not the case anymore,” says McDermott. He says firms realize they have to speak to retail investors and family offices more frequently and distinctly. It’s something firms aren’t used to doing: Publicly available data shows that fewer than 5% of S&P 500 companies have an internal executive responsible for this kind of outreach; historically, firms have dealt with these two classes of investors informally and through external means.
To that point, McDermott says more firms are recruiting for—or exploring the creation of—a position within their investor-relations function specifically to lead outreach to retail investors and family offices. It’s a nod to how dramatically both groups can affect the market’s perspective, as well as how much they’ve changed what ownership of public companies looks like to-day. “Retail and family offices are more of a priority for investor-relations teams than ever before,” says McDermott.
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