Will AI Replace Investor Relations Professionals?
Will AI replace investor relations professionals? Clients ask me that question at least once a week. And who can blame them? AI is already upending IR. AI can analyze and synthesize vast amounts of investor data faster than any human being can. AI can sense an activist investor lurking on the horizon faster than the most proficient IR team can. Analyze complex sets of financial data faster. Predict investing behavior. And so on.
But for all those reasons, AI is a tool to improve IR, not replace it.
AI Ascending
Make no mistake: IR professionals need to come to grips with how AI is changing their worlds – more specifically how people who understand how to use AI are. Institutional investors are already threatening to run circles around IR teams with AI. By now it’s common knowledge that AI-powered algorithms can automatically execute trades. Beyond that, AI gives institutional investors a powerful weapon that can vanquish IR teams. For example, investors can outmaneuver IR teams by:
- Screening for companies that are likely to be acquired. AI can be used to analyze a company’s financial performance, industry trends, and other factors to identify companies that are likely to be acquired in the near future. This information can then be used to contact these companies and to get ahead of the curve in terms of investment opportunities.
- Identifying companies that are likely to miss earnings estimates. AI can be used to analyze the nuances of a company’s financial performance to flag whether it is likely to miss their earnings estimates in the next quarter. This information can then be used to short these companies or to buy puts on their stock.
- Acting on breaking news faster. AI can process vast amounts of data in real-time, allowing institutional investors to immediately react to new information that might affect a company’s stock price. This can give them a leg up over IR teams who may be slower to respond.
As if those threats were not enough, AI can perform many tasks much better than a human IR professional ever will, as I noted above. In addition, AI can do so much more. For instance, AI can analyze historical data and predict future market trends rooted in its machine learning and statistical analysis capabilities. AI can do sentiment analysis to identify trends in investor sentiment and to develop strategies to address any negative sentiment -- much more quickly and accurately than humans can.
But if you consider AI to be a threat inside the IR function, you’re thinking about it the wrong way. AI can actually make IR teams more proactive by doing their heavy lifting. Take sentiment analysis, for example. AI-powered sentiment analysis tool could be used to analyze all of the social media posts about a company in a given day. This tool could then identify any negative sentiment and flag it for investor relations. Can you imagine a human IR professional spending hours manually reading through social media posts about their company when AI can do so in minutes?
When AI does the tedious but essential work, an IR professional is freed up to do more interesting and impactful things – such as responding to negative investor sentiment or building a proactive communications strategy for those times when AI identifies toxic investor sentiment growing.
And the example above doesn’t even scratch the surface. Here are a few more:
- Improve communications AI-powered chatbots and virtual assistants can be used to improve communication with investors. These tools can help answer investor questions, provide information about the company and its financial performance, and offer personalized recommendations based on individual investor preferences.
- Providing real-time market insights. AI can analyze news articles and other sources of information to provide real-time market insights to IR teams (just like investors do). This can help IR teams stay informed about market trends and react quickly to any potential issues.
- Improving investor targeting. AI can help IR teams identify and target potential investors who are likely to be interested in their company, including activist investors. By analyzing data on investor behavior, AI algorithms can identify investors who have a history of investing in similar companies or who have expressed interest in companies in the same industry.
The Human Factor
But there’s something else that’s even more important: a machine cannot and should not create relationships with investors. IROs act as chief brand ambassadors. A credible CEO, CFO, and their IRO need to convince investors to believe in them. AI software does not do any of that. For trust to get built between a company and investors, IR teams need to build trust with both CEOs, CFOs, and investors. The IRO is the link between them all. Instead of being threatened by AI, IROs need to use AI to build trust by making IR people more competent – by capitalizing on all the benefits AI has to offer in order to share better insights faster. My advice:
- Don’t get overwhelmed. Start with two areas of your job that you know you need to do better – say, improving investor targeting.
- Find the right tools to help you. No, ChatGPT is not going to do your job – it’s flawed and needs to be managed carefully although it certainly has its uses. There is a vast sea of third-party tools out there that can perform crucial functions such as analyzing earnings calls and other investor relations materials to identify key themes and trends.
- Double down on relationship building skills. The human element is your superpower. Invest in it.
On October 12, I’ll be talking about AI in-depth at a webinar hosted by the London Stock Exchange, How AI Helps Investor Relations Be More Proactive. Click here to sign up, and click here to learn how IDX can help you build trust with your investors through compelling IR communications. Read more of our IR-related blog posts here. And contact us today.