Baillie Gifford’s James Budden: How to win the emerging generation of young investors

This is the second part of a longer interview with James Budden, Director of Marketing and Distribution at Baillie Gifford – click here to read part one.

Now, James says, “you have to reach consumers through a lot of channels. The activity you do has to evolve with the times, for new formats and platforms.”

LinkedIn is one channel he cites as important: “LinkedIn can offer close targeting even down to individuals at individual firms.”

Another type of outreach is Short Briefings on Long Term Thinking, a Baillie Gifford podcast offering discussions about current trends which was launched at the beginning of 2019. This sits alongside shorter five-minute insight videos.

“You’ve got to look at it in the long term. It’s a series of conversations, with our investors on the whole. It isn’t necessarily geared around funds promotion – it’s information and opinion for interested audiences.”

James says the firm’s marketing budget is definitely skewed towards individual investors.

“You have to spend more time reaching them than 10,000 IFAs.”

The IFA relationships are managed by a smaller team, who have built day-to-day relationships. Targeting individual investors is a much more digital approach.

“The majority of our peers have given up going direct as it’s too much hassle and too expensive.

“I think that’s a big mistake. You only have to look at the increasing importance of the direct-to-consumer sector in terms of incremental investment.

“It’s only 10 to 15% of the whole UK retail market, but this is up from less than five.”

He emphasises the importance of word of mouth for people who don’t employ professional advisors, as these people will hear about the firm through friends and families.

Winning the new generation of investors

James also highlights platforms such as Instagram; approaching the emerging new generation of investors has been a key focus of his.

“For as long as I can remember, the average age [of an investor] has been stuck around 58. That didn’t change for a very long time, but it has changed in the last five years.”

He highlights some key structural reasons for this. One is the pension reforms under George Osborne, which removed the obligation to buy an annuity. He also highlights auto-enrolment, with the trends together meaning that “people are starting their own personal pensions and SIPPs at a much younger age.”

Another “more frothy” reason James identifies is that “people are trying their luck with stocks and funds”, epitomised in the recent Gamestop saga. He says through mobile and investment platforms the idea of investing is “much easier and more direct than ever before.”

Winning these investors will take new types of approach.

“One hopes the people who have dipped their toes in will trust professionals.”

Key to this, James argues, will be firms offering an appealing investment approach.

“There is a wider societal issue at play, best illustrated by climate change and the issues around it.

“The alignment of investing one’s capital to find solutions to big problems – the younger generations find this attractive in a way previous generations didn’t consider.”

The question is what to say to these new investors.

“It’s not ‘buy our American fund which is the best ever’, which is what you might be saying to someone in their 50s.

“What you want to say is: this is our philosophy of what we’re trying to do. We’re trying to allocate capital to people and firms that are going to make the world a better place. Companies that aren’t going to make the world a better place won’t do well.”

“If you can say you’re investing in Tesla that will chime with people,” says James, adding that people will respond well to a fund that is both doing well and backing people they approve of. He emphasises the importance of having a “narrative”. One example of this type of approach is the “investing in progress” tagline.

James says a key challenge is the “hot air” around the ESG space in the investment market.

“Everyone is beating their chest to say they are incredibly ESG-oriented.”

He says that the antidote to this is “establishing a narrative around alignment between actual investing and ESG and how it is investing in the great opportunities of the future.”

The company needs to avoid the pitfalls of “just labelling our funds to say that we are [ESG-focused]. You’ve got to go much further than that – that comes back to authenticity and being genuine about what you do.”

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