Tips for managing the recent uptick in sustainable investing requests from clients.
You’ve probably heard that clients want their Advisers to help them with Sustainable investing. In fact it’s now the number one expectation Australians have of Advisers is to be knowledgeable about responsible investment. New research goes further and suggests that 2 out of 3 retail investors are considering transferring their investments to a new adviser purely based on their Adviser’s current engagement with ESG. So whether you believe in it or not, now’s the time to kick start your transition into Sustainable investment advice.
Here are the top challengers we hear our Advisers are coming up against and some tips on how to overcome them.
I don’t have any clients that want this.
When was the last time you had a client ask you for strategic planning. Never? It’s going to be the same with Sustainable Investing, if you don’t tell clients then they don’t know that you offer it, or what it is.
A simple solution is to make sure you include it in your marketing documents, website and fact find. Or start with a simple Mailout offering the service. You might be surprised how many of your clients want to have the conversation. Remember there is also now an implied obligation under FASEA to ask a Client if they want to consider Sustainability.
Tip: Here are some useful email templates that might help. You can also access the Ethic Adviser platform to access our digital Sustainability questionnaire which you can send to clients.
I don’t know how to kick start the conversation
To begin, it’s worthwhile looking back a little through the evolution of Advice to understand that Sustainable investing is the next evolution in deep values based Advice – there is nothing to fear! It is a great opportunity to have a new conversation with clients about an area they care deeply about, just as though you were talking about their family and wishes when it comes to retirement, insurance or estate planning.
A simple way to get experience is to plan the open questions you’d ask your clients about the topic and find tools to help navigate the conversation. Here are some examples of open questions recommended by Advisers from the Ethic Adviser community:
Would you like to invest in a Sustainable / Responsible manner, taking into account environmental, social and ethical issues?
Are there any environmental issues that you feel strongly about that we should consider in our Advice?
Are there any things you do in your personal or working life that you want to see reflected in your investment portfolio?
Are there any industries that you personally avoid, such as gambling?
I offer Managed Portfolio so can’t do anything about it
Due to the inherent efficiencies, most Advisers offer managed investment solutions giving them little flexibility to make changes at an individual client level or in a timely manner. Clients tend to understand this and appreciate lower fees and strong management principles.
This does not mean that Advisers cannot collect information from their clients and make necessary adjustments to managed solutions at the appropriate time. Even if that happens just once per year, clients will love having their investments be more aligned with their values. Chances are many of your clients will share some of the same views.
Increasingly Advisers are developing alternative Sustainability focused APLs and Managed portfolios. Some tips for Advisers from the Ethic Adviser community when doing this are:
Tip: Make sure you fully research what’s under the hood. Often a Sustainably focused fund won’t display all their holdings – this makes it hard to understand if the fund is truly aligned to the customers Sustainability goals. Similarity watch out for fund managers thresholds on exposure – some will deem a Holding not to be involved in a business area, e.g. Weapons, if it makes less than a certain percentage (eg 5%) of revenue from that exposure.
Tip: One size won’t fit all. Clients have different preferences and goals when it comes to sustainability. You’ll need to educate clients that a Sustainable fund might not meet all of them and understand if the client is willing to make any sacrifices or if another solution is more appropriate.
Tip: Thematics can help tailor to a customer’s needs. Often Customers have a greater focus on an area of Sustainability such as Environmental issues. Create portfolios that support the key ESG themes to help with this alignment.
What is Ethic Adviser and how can it help Advisers with Sustainable Advice?
Ethic Adviser is a Discovery, Analytics, Research, Insights and Advice tool that enables every Adviser to successfully navigate Sustainable Investing conversations. Essentially empowering any Adviser to become a Sustainable Investing specialist without the need to change your entire Advice process, or pay many tens of thousands of dollars and commit hundreds of hours to access and interpret ESG data.
What does this all really mean though? This means saying goodbye to those late nights, spending hours trying to find out how ‘green’ a certain ETF or Fund is, or which causes they may be involved in, or even what the underlying holdings are within each fund. Ethic Adviser was built by Advisers so we know that Advisers are time-poor. With Ethic Advisers interactive tool you can easily identify investments, collect data and even research to build portfolios that match your clients values. The result is less time researching and more meaningful conversations with your clients.