Long Read  

Digitising share certificates long overdue

One notable example is the move to online banking, which required a well-considered and careful roadmap to support customers in the move and deliver improved service and efficiency. 

The pandemic further accelerated these efforts, including, through necessity, the move by advisers and investors into the digital space. For many, digitisation became a critical way to engage with investors and offer services and advice during a period of disruption and financial uncertainty.  

Many advisers approaching digital services for the first time have experienced the benefits. At Euroclear we have received positive feedback from the intermediary community about how customers primarily accustomed to dealing in paper adapted to electronic formats during lockdowns. 

Firms are looking to build on this foundation but, to do so successfully, they need a modernised regulatory framework to support their efforts – and the taskforce, through consultation, will have a key role. 

Investor participation

The digitisation initiative, however, extends beyond the removal of paper share certificates. The Austin review, which commenced in October 2021, examined the broader topic of improving capital-raising processes for publicly traded companies in the UK.

This included investigating the role of technology to transform how individual shareholders receive relevant information and participate in secondary raises.

A key focus, therefore, will be to improve the ultimate beneficial owner’s visibility to the issuer and also their ability to vote and otherwise take part in the governance of the issuing company.

The challenge for advisers will be having the means to relay information to their clients efficiently, and this can be solved, in part, through new and innovative services made possible by digitisation. 

A precursor to greater innovation

The ambitious model for digitisation could open new opportunities, including the advent of evolved wealth-tech solutions that leverage the promise of open finance and deliver innovative services to advisers and their clients.

Open finance promises to empower investors by offering to combine their personal data with financial institutions’ technologies to analyse, move and manage their assets and risks. 

This is just one example of the direction of travel and there are a number of transformational debates taking place. Others include the reduction in settlement cycles and the emergence of security tokens as digital representations of traditional securities.

The digitisation of share certificates is an important precursor and potential enabler of these wider narratives and potential future innovations. 

Supporting advisers in the move to digitise

In the coming months, we can expect to see greater clarity on the transition as the taskforce and other industry bodies step forward and engage directly with the adviser and investor community.

For advisers, now is the time to be heard and play an active role in these interactions. Only by this process will the right model emerge. 

Fully digitising the City will be transformational. However, it requires a careful, co-ordinated approach to ensure advisers have the support needed to implement the move fully and, ultimately, leverage the benefits it can bring to them and their clients.