The AIC are to be congratulated on this survey.
The survey was conducted by the lang cat on behalf of The AIC, and looks at practices with respect to voting for Investment Trust shares. But it looks to me to be a pretty good summary of their voting services for all UK shares.
It seems like Fidelity have decided to follow good practice. But it seems HSBC and Bestinvest are still refusing to offer a voting solution, which is quite disgraceful. When will they learn?
Of course, what is really needed is a slick, neat system which empowers investors.
The platforms approach to voting is self serving. Only 6% of retail shareholders vote. Why? Because it is not easy! Because it rarely affects the end result! And because retail shareholders do not have an easy way to organise themselves together to vote collectively!
It is possible for individual investors to vote their shares and for companies to find out who is the ultimate beneficial owner of shares in nominee accounts. It is also the case that many individual investors find nominee services efficient and cost effective. We are planning to discuss with platforms the following ideas.
Currently only 6% of retail investors vote, so there is a problem and an opportunity.
We want investors to vote.
- So do the government
- So do the FRC
- So do the financial media
- They are all in favour of shareholder democracy.
Rational economic man and economic theory tell us that individual investors are being logical in not voting as individually they cannot affect the result and the economic benefit of spending time voting is very marginal and their personal time cost in doing so is large in comparison. However, given that retail investors are 12% of share registers collectively (and 29% for AIM companies), they are an important swing vote constituency.
We think that platforms could help address this problem. In doing so, they would garner great publicity, as well as doing something very useful to rebuild trust in finance.
How? Easily and cheaply. We would like a platform(s) to create a designated account for its customers (both ShareSoc members and others) so that their shares can be voted in line with ShareSoc policy as the default voting position (with an opt-out facility if they do not agree on a particular company resolution, so it is their choice). We have discussed this possibility with Sarah Wilson of Minerva/Manifest who is an expert on voting, who confirms our suggestion is feasible and would be willing to provide support to make it happen.
This would cover FTSE 350 UK listed companies initially, whilst we test the concept and see if the benefits were real and the demand for the service high.
The benefit to a platform(s) is that it will have a customer service that no-one else is currently providing.
Our approach is very different to initiatives by others. It is unique and offers a big advantage. You may have seen the city wire article http://citywire.co.uk/investment-trust-insider/news/ian-cowie-platforms-get-the-message-on-shareholder-votes/a1137638. and a similar one in the FT. Those articles are about voting for individuals not collective voting. There is a big difference between being allowed to vote via a clunky system and finding a slick, neat system which empowers investors.
Cliff Weight, Director, ShareSoc