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By Julia Bradshaw | Published Jul 30, 2012

New best practice standard includes social goals

The 16-page ‘Advising Clients on Social Investments and Decisions on Suitability’ report set out the findings of a working group of financial services and social investment experts convened by Big Society Capital, Bates Wells and Braithwaite and Worthstone.

The group, which included Nick Cann, chief executive of the Institute of Financial Planning, was tasked with exploring the relationship between social investment and regulatory suitability and setting out principles IFAs might use to determine the suitability of social impact investments for clients.

It said investment advisers should ask all clients if their investment objectives involve social impact investing and develop a new set of tools to determine whether such investments are suitable.

The report called on regulators and trade bodies to do more to make social impact investing easy for advisers and a mainstream option for clients.

It also made recommendations to European and UK authorities and financial regulators on how to integrate social investment with financial services regulation, in particular around the regulatory definition of suitability.

Luke Fletcher, a lawyer for Bates Wells & Braithwaite, said: “The report makes the case for a new standard of best practice which involves advisers asking clients about social goals, as well as more traditional financial goals.”

David Thomson, director of policy and public affairs for the Chartered Insurance Institute and a member of the working group, said: “At this stage the key issue is debating recommendations and the concept of social impact investment in terms of suitability, regulation, tax and advisory requirements. Clients want social impact investing so it must be part of an IFA’s arsenal.”

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