ESG Investing  

IFAs told to 'take ownership’ of engaging clients in ESG

IFAs told to 'take ownership’ of engaging clients in ESG

IFAs must take ‘ownership’ of engaging clients in responsible investing if they want to tap into the potential of this growing industry. 

Royal London’s Ryan Medlock forecast that 2021 will be a pivotal year for environmental, social, and governance (ESG) investments and that advice firms would do well to integrate it within their advice processes and investment propositions. 

Medlock, senior intermediary development and technical manager for Royal London, said: “2021 is shaping up to be a really pivotal year in the connection to responsible investment.

"Yet I am aware there is so much noise around this area. I want to cut through this noise and really focus on some of the ways that advice firms can start to integrate responsible investment considerations within their advice processes and investment propositions. 

“There isn’t a silver bullet here, I think a strong sense of ownership is really required in this area, particularly to engage clients to sense their needs and motivations in this area.” 

He made the comments during the Pimfa Virtual Fest V2 today (March 9), where he discussed best practice in how to prepare and conduct client conversations in this area as well as suggesting the prudent steps that financial planners can take to integrate responsible investment into their fact-finding process.  

Medlock said: “Based on the best practice that I am seeing, maybe introduce a number of additional questions into your standard fact-find because that will allow you to capture your client’s response on responsible investment and for those clients that do express an interest then you can use a supplementary questionnaire, which really tries to tug at the client’s preferences.

"There is no right or wrong answer here. But what I will say is that we need to be mindful of how probing questions are framed because it is important that you don’t introduce your own views on responsible investing onto your clients.” 

He said terminology surrounding the ESG industry, and lack of clarity has held some advice firms back from making traction within this field.

However, advice firms can start this process by having internal conversation about what ESG goals they want to incorporate into their business and how to practically implement them into their systems.  

He also warned against the dangers of greenwashing, which is when an asset is marketed as green but is not in fact green.

He added: “Greenwashing is a real challenge for the industry, I was shocked when I saw that 85 per cent of green funds have misleading marketing – it’s unbelievable.

"Advice firms need to make sure they are all over greenwashing and not falling for clever marketing campaigns. A fund’s name is not always going to reflect what’s under the bonnet.” 

Medlock added that better regulation has helped to drive up the public’s interest in ESG and that sustainability should be a core component of financial planning.