This episode of Winning IR highlights the challenges and benefits of building an in-house investor relations department from scratch. Brooks Rennie, Vice President, Head of Investor Relations at Byline Bank, joins Mark Fasken to share his experience in developing an investor relations department from the ground up. Listen to the episode or read the transcript to learn more about:
- What steps should you take to build a business’ IR function from scratch? What’s needed to get from day one to long term success?
- How can you become an expert in the company story in a short amount of time?
- What are the major components of an investor relations strategy?
- How has the investor relations function changed from day one to present? How can IROs measure and affect progress towards their KPIs?
- How does a business change after developing in-house IR?
- What should IROs avoid when developing an in-house IR function?
- What should IROs look for in management to ensure a strong working relationship?
Fasken
So Brooks, I thought that I'd start with a bit of the backstory that you've been in IR your whole career. How'd you get into it?
Rennie
Yeah, Mark, great question. So I know nothing else, but IR and corporate development. So I started my career with a band called TCF Financial Corporation, which was a mid cap bank headquartered in Wayzata Minnesota. I did two internships with TCF. And was curious about the overall, you know, kind of financial markets. And I heard about what investor relations is, and was very quickly sold on what it was. So I was able to develop myself through an internship, as well as then transition that into a full time career. So I've spent three years in investor relations and corporate development as an analyst with TCF and then that transitioned to US Bank, where I was there for about a year and a half. And then now here with Byline bank. So in total, I’ve been in IR for about five years.
Fasken
And in some of these roles you've been in, going back to the topic of the podcast today, you've been part of the build out of some IR programs. And so at Byline, I think in particular, how have those previous experiences impacted how have you built out the IR function at Byline?
Rennie
Yes. So when I was with TCF as an analyst, I was a part of an outdated, reactive, stodgy department and transitioned that into a proactive high performing engaging department within six months. And how did we do that was we kind of started from scratch, we did sell side analyst reach outs to to learn about what the pros and cons of the company were, as well as recommendations, we reached out to our top 25 institutional investors to gauge what their thoughts were on what's working/what's not working. And then in addition to that, we interviewed executives, and we wanted to understand are we telling our story correctly, And is there a better way to do that? And so after we gathered all that information, Mark, we then created a very detailed investor relations plan. We'll go out, tackle this in the next six months, 12 months, and then a year and a half after that. And so with that, that really grounded me on how to, you know, build the fundamentals in place of how you start an IR program. And I was able to learn that at a very young age of my career, which I think really gave me a step forward into my opportunities here at Byline to establish an Investor Relations Department with the company I'm at today.
Fasken
So now at Byline, and you've sort of been a part of building out the department, what have some of the steps you've taken been? Right? I mean, thinking about somebody who may be listening, and they're just in the first steps of that process? Whatsome of the things they should think of?
Rennie
Gosh, yeah, sure. So I joined Byline a year and a half ago, in July of '20. And so my overall process for me to build the IR department was first to learn the company's story, and assess what resources are in place. You know, I was lucky enough to join two weeks before the company's quarterly earnings release. So I got the opportunity firsthand to see how quote unquote, you know, the sausage was made. And that was a great opportunity for me to, you know, connect with, you know, people in each other, you know, different functions within the finance department. So for me to understand, you know, what are their processes? How can I add value here, throughout that, you know, short span, and then post-that the next three months, I was a sponge, and as I learned the business, participated in investor meetings, successfully got through my first earnings with the company. And then in addition to that, was able to really connect with the executive management team to understand their roles, their processes, as well as how they interpret the Byline story. And so after my assessment Mark, which was, you know, five months, I would say, I then created a very comprehensive, detailed 60 Plus page investor relations plan to formalize the department, as well as you know, kind of make the next step in building the foundation of the company's IR Department.
Fasken
I've sort of two follow up questions to some of those steps. One of them is, it seems like in a lot of these interviews that we've done, IROs talk a lot about understanding the company's story, like being the subject matter expert. And so how did you do that? Who did you talk to? What were some of the steps that you took to feel like you had a really good deep understanding of the business?
Rennie
So great question, there's true. Two ways that you can do this. One is you need to roll up your sleeves, and to do the homework on your own. And the first things that I did was look on the company's IR websites to first understand, and I read the 10 Q, as well as the annual report just to fully understand the business. And then I read the investor presentations, as well as the earnings releases, so I got pretty comfortable of, you know, where's everything, disclosed what company what you know, what lending businesses are, you know, is Byline in? And then, in addition to that, I then interviewed and got to know all the executives, and like I mentioned, hear their stories, and how they interpret Byline.
But to be honest, Mark, the best way to understand and hear the story is to just sit and listen in investor meetings, and listen to your CEO, CFO and President tell the story their way, because they're all going to have different unique ways of telling the story. But in the end, it comes together of, you know, the background of it, you know, the process, as well as the the overall growth story of the company. So, you know, I would recommend, you know, doing your homework, as well as just being a sponge and listening and taking, taking notes.
Fasken
That's great. Another question that I had, because you've mentioned twice sort of a comprehensive plan. And obviously, there's a lot of different components to this. But I've seen actually, in the NIRI forums, a few people ask, what are some of the major components of an investor relations strategy or or plan as you say, what would you say are maybe some of the three or or five major pieces that you think somebody should have in that plan?
Rennie
I would first start with understanding what was the history or the evolution of the department. So when I came in to Byline, there was no formalized in-house IR department, there was the CFO, as well as some other finance, business whiteheads, you know, kind of all pitching together to get the earnings release, the earnings presentation out, as well as IR activities. And so what I would do is one, first understand the history and create an evolution of the department, to see what the past is what the current is, as well as what's the best in class IR function or department that you want to create, as well as then developing and understanding KPIs for IROs to measure their success.
And so what does that mean? It's very, I think, tough to measure IROs just due to it being a unique department, however, there are key quantitative metrics for IROs to measure their success, which would be, for example, stock price valuation, share retention, and makeup of the shareholder base, sell side analysts ratings and coverage IR website, analytics, investor perception studies, awards, as well as the quality of investor meetings; I think that's a really important one, because you can meet with some of the same investors over and over, and they may not, you know, invest in your company, or they might, but it's always good to strategically target investors that would fit your story, either if you're a growth story, or GARP, or a long term investor, to try to try to get them in front of your CEO and CFO and management team. Because their time is obviously very sensitive. And so you just need to be thoughtful on the quality of the investor meetings, followed by the number of shares purchased.
And then just a few other, you know, things that can go into an IR plan would be understanding the resources that are driving value for your IR department. And what does that mean? So that would be you know, who supports internally, the department? What vendors are you using appropriately? Is there opportunities to either enhance your budget or decrease your budget, as well as then, you know, being thoughtful on just being detailed with the resources that you need. And then the last two, Mark, I would mention would be, how do you look for opportunities to enhance and elevate your department? Meaning, is there a way to enhance your earnings preparation, engagement, message developments, where you tend to make efficiencies in reports? Or is there a better way to tell your story if there's an event going on within the market, or your industry during earnings. And then lastly, it would be to increase analyst coverage. So when I walked into Byline, we'd had four analysts covering us. And I have been proactively, you know, reaching out and engaging with sell-side analysts. And I've had the opportunity to successfully have two analysts launch coverage on us since I've joined. And that's been a really positive opportunity for the company. So there's, there's a number of ways to do investor relations plan. It just really depends on where you are within your company, as well as what are the needs for the department to get established?
Fasken
So those are some great points. So maybe taking a little bit of a step back. I mean, so you've your at Byline, now you've sort of sat down, you've understood the story. You've put together that plan. So now fast forward, looking back, how has some of the work you've done changed? Are there processes within the business? How have things improved at Byline? I mean, you just touched on the analyst coverage. But what are some of the other areas of improvement that you've seen?
Rennie
Sure, yeah. Great question. So when I joined, there was not really an outreach plan or investor targeting, where there was limited as well as reactionary communication. And so I created a targeting methodology on potential investors that we would like to meet with, and so I've been proactive, when we are going to go to the investor roadshow, or conference, wherever in the United States, I have been reaching out to institutional investors that would, like I mentioned, be interested in getting with us, as well as that makes sense, right? We just don't want to go have a meeting to have a meeting, we want to have a meeting with an investor, that would be a potential buyer, as well, as, you know, trying to be thoughtful on management's time. So I have created a methodology, targeted investors. And so if you want to look on a year over year basis, we've increased our institutional investors by by 55 investors on a year over year basis. And so I think that's a nice metric to show that, you know, the targeting does work. And so that's one one item that I would say has been successful, as well as just overall communication with the street. You know, we've been thoughtful in our messaging when it comes to earnings, as well as last week, we announced an M&A acquisition of another bank. And so there's been a lot of different opportunities to say the least to get in front of investors as well as analysts to tell them the Byline story.
Fasken
Glad to hear you say the targeting does actually work. A lot of people that question the value of the direct outreach so glad to hear that it's, it's working very well for Byline. You've talked a lot about things to do things that you should do. Let's cover some of the things that maybe you shouldn't do as an IRO who's building out an in house program? Are there any things that you think people should avoid?
Rennie
Great question. So, you know, I think investors are essential to a company. And so I think you need to be thoughtful on management's time, especially how things have changed through COVID. Historically, before COVID, you know, you could go into several different conferences within the quarter, as well as roadshows. And that's changed, and we need to adapt to our taking investor meetings. Now a lot of that's virtual. And so, I would think about being more thoughtful on management's time, as well as like I mentioned, being strategic with your targeting effort.
Another don't would be to to be, I guess, more thoughtful on your approach when it comes to messaging. There's a lot of check the boxes and the ways that IR has been ran historically. And I just think that there is still kind of back in the olden days where the investing is even more next generation. And so I would say be more thoughtful when it comes to dealing with investors. And if they're not able to take meetings, that's okay. As well as just, you know, be being more willing to reach out and be accommodating.
Fasken
Yeah, that makes sense. Kind of like a maybe just to, I think what I'm getting out of that is that, as you build out an in-house program maybe it's, there's a feeling of like, I need to get out there, I need to talk to investors, we need to get meetings, but it's, which is true, but to your point, you want to be thoughtful about it, make sure that, yes, you want to go out and talk to investors, we want to talk to the right investors, and not just feel like maybe you're spinning your wheels,
Rennie
I was just going to mention when it when it comes down to formalizing a department, you know, be thoughtful, as well as it's going to take a while. So you're not going to be able to just, you know, create a folder, and then say, oh, you know, the department's, you know, formalized here, it's going to take time, it's going to be challenging, because you're going to try one avenue and it may not work. So you need to adjust or pivot. And so I think the best recommendation that I would seek out would be, you know, you can't do it alone. You just can't. And so be willing to ask questions, roll up your sleeves, it's gonna be hard work. But, you know, pull people in to help you. And because they, they may have great ideas or recommendations from an outside perspective that can definitely elevate your game, as well as just the overall company. And so I would seek help in building out an IR department.
Fasken
Yeah. Yeah, that you made a great point earlier about going out, building those internal relationships, asking lots of questions, I think not being afraid to ask those questions. I also think, to your point earlier, the KPIs are very important, right, of not just kind of going in and not necessarily having KPIs or maybe having KPIs yourself, but not having agreed upon those with the management team, making sure that everybody's aligned. So those are all really great points. Another one that I had was around budget. If you're building an in house program, maybe there hasn't really been an IR budget before. What can IROs do to build out that budget? Any? Any suggestions?
Rennie
Yeah, great question. So I think you first need to recognize that, you know, IR is a very niche, very key executive role for your company, where everything flows through, you get to touch finance, uoi getto touch communications, marketing, as well, as you know, your closest three or four people that you work with are your CEO, or CFO, your president, as well as your head of corporate development. And so when it comes down to the budget, you have to recognize that IR is an expense to the company, right, you're not generating any revenue, per se. So I would say be thoughtful, on, one your expenses, as well as two you need to figure out, you know, what, everything rolls into your budget. So for example, if you're a publicly traded company, you're either going to be taken if you're based in the United States, you're going to be, you know, listed on the New York Stock Exchange, or the NASDAQ period. And so, you know, that's a servicing fee, that, you know, for your listing fee, that that that comes out of your budget, as well as you as a stock transfer agents, either with Broadridge or AST, or several other respectable transfer agents. And so those two are are fairly large costs that are going to be in your budget that you need to be thoughtful of, well, they're not going away, per se, but you just need to be thoughtful on on that pricing. And so when it comes down to specific vendors on where you're gonna get your CRM, for example, you know, there's several very strong, respected, you know, vendors out there that can, you know, provide you data analytics, you know, market data, so that that's an expense that is needed, but you need to be thoughtful of which one you want to do. As well as what you can leverage from that. And so, you know, that that's another one is those you know, hosting your IR website to hosting your earnings calls. So when it comes down to a budget, understand what everything is rolling into your department, as well as look for opportunities to either negotiate those prices down or to, you know, look at everything that's out there, I always encourage people, especially, you know, heads of IR to understand what every vendor out there does, because if it's a new vendor, you know, it may not be the right opportunity for you. Now, that doesn't mean in the future, that could be really, you know, really positive, enhancing your overall time, efficiencies, down the road because as an IRO, either if you're, you're a one man person, or do you have a small team of two or three people, you know, your time is very, very limited, because you wear a lot of hats. And so if there's a vendor out there that you can leverage that could help you, or you can be twice as efficient. You know, you need to be aware of that.
Fasken
That's great. Yeah, that's great advice. I mean, I think, to your point, it's like deciding on what are the what are the must haves and the nice to haves. And I mean, there to your point, there's a lot of different things that roll into that IR budget. The other question that I had, it's, it's come up in a couple other conversations. And I think what it comes down to is like choosing the right company, you know, to your point, starting an in house IR program is not easy. And so are there certain characteristics that you would look for in a company that would indicate your likelihood of success for somebody who may be joining?
Rennie
Yes. And so it really depends of what appetite you're in for. I think you can, you know, through your interview process, you know, with the key executives that you're probably in touch with, I think you can quickly form of is this executive, you know, able to talk to, are you gonna be able to connect with them? Are you able to travel with them? Because, you know, in IR not just earnings, but you're gonna be traveling with them all over the US. And so,
Fasken
The airplane test! That's a real thing isn't it?
Rennie
Yep, absolutely. It's, it's being able to, you know, connect with the person as well as another characteristic would be, you know, trust, you know, being entrepreneurial, challenging the status quo and seeking you know, constant feedback, I think, you know, if they're, if the company is, uhh frantic, I think that, you know, could be a red flag. So, I would seek just understanding the company, as well, as you know, the key people that you're going to be working with day in and day out and trying to understand, is this a right fit for you? Or is it not?
Yeah that's a great point. That's, that's actually one that's come up in in a few other conversations as well, which is that culture fit and just how important that is, because to your point, it's a it's a tough journey, especially if you're building a program for the first time you need somebody who's going to trust you and try new things. Think outside the box a little bit.
Yeah like I mentioned, previously, you know, it's, it's a team effort. And you got to be willing to have people also help you support you, you know, with a day to day process, because, you know, you're just not just doing IR on a day to day basis, you know, there's a lot of different hats, and a lot of different ways that you're getting pulled. And so you just need to be able to adjust quickly, as well as have, you know, a team of people within your finance, legal department that can help support you when things get tough.
Fasken
So, we've had a lot of great tips as we've gone along here. Somebody's stepping into a position building an entire program at an established organization, what would you say? Is the first thing they should do?
Rennie
It's a great question. Take a deep breath. And it'll be pretty fortunate because it's, it's a very unique opportunity that doesn't come along a whole lot to to establish an IR department. And you don't be ready to roll up your sleeves to get to work, because it's going to take a lot of time and a lot of efforts to build the function out, create a plan, and just as needed, be patient because, you know, it's gonna take time to establish a high performing department the way that you envisioned it. You know, we're the business, ask questions. You know, don't be afraid to try something new and to challenge the status quo. You know, it's it's your playbook go out and try new things. You know there, it's a fantastic opportunity to work with executives as well as meet and be in the, in the room with some in front of all smart people that are institutional investors, sell side analysts, you know, people in M&A as well as you know, lawyers. And so, you know, be able to learn, as well as provide feedback and input when needed. And be confident because, you know, that company is investing in you, they are trusting that you can be be successful, and they want you to be successful. And so, you know, have the opportunity to lean on executives to ask them what their input is, as well as befriend and get to know and have a great relationship with your board. Because the board members are there to help you as well. And so the more relationships you can create, the more you can network, as well as just have a strong team and foundation in place that can really tee up for a really successful department, you know, going forward.
Fasken
It's great advice. Thanks, Brooks. I really appreciate the time. And I'm sure that we'll be chatting again soon. Thank you.
Rennie
Yeah, absolutely. Mark. Thank you.
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