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More evidence that few read annual reports

By Dominic Jones on July 13, 2011

A NEW survey of Canadian online investors has found that few rely on formal disclosure documents like annual reports for investment information, even though most describe themselves as long-term investors.

The findings of the latest RBC Direct Investing poll of 630 online investors once again highlights the need for companies and their regulators to rethink the role annual reports and prospectuses play in investor relations and financial disclosure programs.

rbc_direct_investing

The poll found that just 12% of those surveyed said they used “mutual fund prospectuses or corporate annual reports” for their online investing research. Interestingly, more females (17%) than males (9%) do online investing research using these sources.

Here’s how the responses broke down when people were asked “Where do you get your research for online investing?”:

  • 62% — online resources other than my online brokerage website;
  • 52% — general media (newspapers, magazines, TV);
  • 51% — my online brokerage (website, telephone, e-mail, etc.);
  • 39% — financial or business media;
  • 23% — family and friends;
  • 18% — my financial advisor;
  • 12% – mutual fund prospectuses or corporate annual reports;
  • 5% –  other

Echoes prior findings

The results of this survey echo findings in a range of other investor surveys going back several years. All show that few investors use corporate annual reports and formal disclosure documents – and those who do consult them do so only briefly.

Recently, a survey by Sweden-based Box IR of 106 investment professionals found that online annual reports ranked among the least useful activities companies can undertake. And a large-scale survey (PDF 720KB) by the US Securities and Exchange Commission in 2008 found that more than half of retail investors surveyed said they rarely, very rarely or never read company annual reports.

However, despite the persistent mounting evidence that investors seldom read the documents, companies continue to spend large amounts each year creating annual reports for both print and the web.

While there remains a need for a print and PDF audited annual corporate reference document, any investment in such a document for marketing communications purposes is wasted since they are seldom used. Companies would do better to reallocate resources to providing non-annual report web resources that target the needs of their various investors.

Other key findings from the RBC Direct Investing poll include that only 15% of online investor account holders invest for short-term goals while 46% invest only for the long-term and 39% invest for a combination of goals. Fully 73% of online investors have been investing for longer than three years and of these, 92% are 36 or older.

Top reasons for opening an online brokerage account include convenience (96%), to have control over investments (95%) to save on fees and commissions (92%) and to become a better educated investor (76%).

  • What do you think? Has the time come to replace glossy print annual reports and non-PDF online versions with something new and relevant to the audience?

Dominic Jones

Dominic (bio & disclosures) is IR Web Report‘s founder and an online investor relations consultant. He advises leading public companies and investor relations service providers worldwide on using the web for disclosure, engagement and profile building. You can contact him via the contacts page.

Posted in , | Tagged , | 7 Responses

  • http://twitter.com/HicksSimon Simon Hicks

    Surprise surprise.

    Have been saying for years that with continuous disclosure obligations and modern technology, the old fashioned annual report as a marketing tool has become redundant.

    They fulfil a regulatory role and a financial snapshot and that is about it.

    Marketing funds are better spent elsewhere.

    At least…that is how I see it :)

  • http://irwebreport.com Dominic Jones

    @Simon Hicks +1

  • http://ideasonpurpose.com Michelle Marks

    Annual Reports may not be used frequently by investors, but among our clients we have seen corporate reports (in print and online) used across a wide range of stakeholder groups. Often the corporate annual report is a cost effective way of reaching multiple stakeholder audiences–employees and recruits, business partners, regulators, etc.–in addition to shareholders. And, for many large diverse companies, it is often the only place (save the corporate web site) that they talk holistically about the company. Whether the 10-K or financials  add to the strategic messaging is a question for each company individually, but an annual assessment of strategies and goals shared with all key stakeholders improves disclosure and transparency, and gives stakeholders reason to invest (in all senses of the word) in a company and its brand(s).

    • http://twitter.com/nineorcas NineOrcas

      20 years ago it was standard practice for most large public companies to annually produce an annual report, a corporate brochure, an HR recruitment report, and maybe an environmental report, etc. It was the corporate brochure which was most used to speak holistically to all other stakeholders other than shareholders. In fact, most annual report mailings used to include copies of both the annual report and the corporate brochure. Between then and now there has been a blur of cross-purposed corporate silos trying to make one or two print vehicles be all things to all people, fairly unsuccessfully according to all available research. Given the web, companies should really be focusing on cost and communication effective “about us” sections with all the information any possible stakeholder group should need, with easy to print options. Unfortunately too many justify continuing poor communication practices of churning out print annual reports that go unread not only by shareholders but by the majority of all stakeholders. We need to look for innovative solutions that first provide the information stakeholders want in the formats they choose (to ensure communication effectiveness) and to therefore ensure cost effectiveness.

  • http://irwebreport.com Dominic Jones

    Michelle,

    I’ve yet to see any evidence that non-shareholders read annual reports. The evidence I have seen suggests that few in any audience segment use the documents. Perhaps, as Pam says, it’s because the document is trying to be all things to all people and in the end is nothing to any of them.

  • http://twitter.com/ThomasRos Thomas Rosenmayr

    It’s very sad to read this! I am still convinced that a good online report does create value for their users. We also see clicks stats of our clients still rising. But saying this I cannot judge if ressources spend somewhere else might be more efficient for companies.

     

  • Anonymous

     

    Let’s see … 44% of the investors polled by RBC say they’re not
    confident investing on their own, 38% confess to having inadequate knowledge
    and roughly half think they sometimes take too much risk. Could it be that NOT
    reading prospectuses and annual reports is contributing these feelings? I’m
    just asking.