‘Say’ Helping Investors Be Heard

New firm trying to help bridge communication gap between investors and companies—and even ETFs.

Reviewed by: Drew Voros
Edited by: Drew Voros

Alex LebowAlex Lebow is co-founder of Say, a New York City-based technology company hoping to disrupt investor communications. Say serves millions of investors as a full-service proxy processing and shareholder communications provider in partnership with leading broker-dealers and custodians. It’s also pioneering new modes of shareholder engagement between investors and the companies, the ETFs and mutual funds they own. The two-year-old firm went public facing this year with its platform, Say.com. ETF.com spoke with Lebow on what his firm’s trying to do.

ETF.com: Speaking to our audience—financial advisors and investors—what’s Say.com about? And why should people care?

Alex Lebow: We go by just “Say,” although “Say.com” helps people distinguish us from just the general word. The basic concept is connecting investors to the companies and funds they own. Most investors, other than the largest institutional investors, don’t really have any connection with the companies and funds they own, other than through the proxy voting system, the formal regulated plumbing, as it’s known.

We took a look at this system and said, “There's a tremendous opportunity here to connect shareholders with what they own, in new ways, using technology.” It’s a corner of the financial system that’s been pretty much not touched by technology, other than the transition from physical postage, which still takes place quite a bit, to email. The movement of proxy materials to email is kind of billed as the great technological advancement of shareholder communication system.

ETF.com: When you say “connect,” what do you mean? Beyond proxies?

Lebow: We break the world down into two areas. There's the regulated system, which is proxy voting, which is very important. The legitimacy, the directors, and whether it’s the fund board or a corporate derived from the votes or the shareholders, that’s an important system.

But outside that, there's a world of shareholder engagement of interactions between companies and shareholders that can be fit into the bucket of stewardship, or marketing; and in the case of funds, fund managers, asset managers, building a deeper relationship with their clients to better serve them.

ETF issuers don’t know who the vast majority of their shareholders are. They can send materials to them—like marketing materials—but it doesn’t really make sense from an economic perspective. It’s done as little as possible, only in connection with a fund solicitation when they need to, legally.

If you could—on a regular basis in an electronic, low-cost way—talk to your fund holders and have them talk to you about what they care about and what they're most interested in, that’s a revolution in the product.

That doesn’t fundamentally change the portfolio. It’s kind of distinct from portfolio management. Economically, everything is the same. There's a new layer on top of that ownership that’s turning a passive product, adding active engagement to a passive product—that’s the way we like to talk about it.

ETF.com: How does that work when it comes to ETFs, that, say, own shares of Apple, in a third-party way?

Lebow: [ETF shareholders] are not direct legal owners of Apple. As part of a fund’s fiduciary responsibility, the fund’s board votes on the Apple proxies, and engages with a company, depending on the fund.

We do a few different things. One of the things we do is on our shareholder engagement platform, not the formal proxy voting business. If you own an ETF that owns Apple, you can take part in the Apple engagement for the pro rata amount of Apple that you're exposed to through your fund, and which—in many cases—is quite small.

But we do the math, we have all the back-end data. But it’s as if you own Apple directly for purposes of engagement.

ETF.com: So what does that produce? Telling the ETF issuer how you’d want them to vote on an upcoming proxy?

Lebow: Yes; the output of that is delivered into two different places. One directly. So, for example, we do a lot of work with Tesla. Beyond Tesla, through a fund, you can upload questions for Elon Musk to answer at the annual meeting, like he did a few weeks ago, by virtue of your fund ownership.

Separately, there's another whole world of stewardship, and what we call “fund consultation,” which is when the people who do voting and engagement on behalf of the fund go to make their decisions. An additional valuable input source of data for them is, “What do the fund holders actually think about this?”

And it can be not necessarily a particular proxy voting question that’s probably too granular for people to be interested in—unless it’s something really kind of hot, like a shareholder proposal, or a merger, or something like that—but at a higher level of abstraction, such as, what do the fund holders think about this ESG [environmental, social, governance] issue?

What's the prevailing point of view on governance across the body of beneficiaries who we’re ultimately here to serve in the first place? How is it possible to vote and engage in the best interest of the fund holders without actually talking to the fund holders about what they want?

ETF.com: Do investors pay for this? 

Lebow: It’s free for retail shareholders. That just isn't part of our model or philosophy. The principal business that we’re in, from a revenue perspective, is the regulated communication distribution. That’s another line, which is facilitating the proxy materials, distribution and proxy funds, and fund reports, also annual and semiannual reports from ETFs and mutual funds. We do all of that.

ETF.com: Must companies and ETF issuers sign up for the program on their end to make the communication work?

Lebow: We don’t need fund issuers or companies to be committed to taking part. What we can do is just take the output of what we've done and give it to them, which is something we've actually started doing: “Your shareholders are out there. We have a bunch of them on our platform. Here’s what they want to ask you.” And also, “Here’s some basic information about who these people are.” We just give that to like the IR [investor relations] department at a public company or fund and say, “If you're interested, we can formally work with you.”

ETF.com: How do you authenticate what a user owns?

Lebow: It’s an extremely important point of differentiation for us that we actually confirm share ownership. There are two main channels. If the shareholder keeps their shares at a broker-dealer that we do proxy processing for, we get the data from the brokers every night about what positions data.

We have a formal link to the broker. It’s only for a few brokers. If you're not at one of those brokers, you enter your brokerage credentials, and we have an authentication layer. We partner with a third party that provides a service that authenticates brokerage holdings.

We never touch those credentials. Data security and privacy are important. Our philosophy is to keep as little as possible on our system. We don’t ever see brokerage credentials. We keep the positions for purposes of the product. We need to know what people own.

The data exists for purposes of facilitating the engagement experiences that the shareholders come to us for in the first place. A lot of the modern financial apps—Acorns, Robinhood, Mint.com—use this account linking technology.

ETF.com: Do you work with institutional investors?

Lebow: We've started out with the retail hub plans, and we’re moving more towards discovering what the institutional space looks like for us. It’s not the biggest. The stewardship function that I mentioned earlier, that works for Vanguard, BlackRock, Fidelity, because they have 20 million fund holders.

But for the engagement part, it’s like a shareholder directory. The big guys have a direct line to Tim Cook [Apple CEO] whenever they want. The smaller to middle-market endowments and family offices are underserved right now.

Contact Drew Voros at [email protected]

Drew Voros has nearly 30 years' experience in financial journalism. He was a longtime business editor for the Oakland Tribune and sister papers of the Bay Area News Group, and finance writer for the Hollywood trade publication Variety. Voros' past roles have also included editor-in-chief at etf.com and ETF Report.