Intergenerational Wealth CPD course  

How to incorporate responsible investments into recommendations

This article is part of
Guide to intergenerational wealth tools

How to incorporate responsible investments into recommendations
 Credit: S Migaj via Pexels

Responsible investing is going down a storm within the intergenerational wealth transfer market.

Indeed, according to Martin Stanley, chartered financial planner at Rowley Turton, it is more like a "tempest, having grown so much that it is hard to keep up". But he argues that advisers must make a concerted effort to stay abreast in this field through continuing professional development in order to attract and retain the next generation of investors. 

Commenting on how advisers can incorporate responsible investments into recommendations for inheritance planning, Stanley says: “Socially responsible investment options have increased gradually for some time, but only in the past couple of years has the trickle turned into a flood. 

"New socially responsible investment funds now appear almost daily and investment managers are falling over each other to explain how they measure up. The explosion seems at least partly due to a belated realisation that the approach needn’t necessarily mean compromised returns."

He adds: “From an adviser’s point of view, socially responsible investing is developing so fast that keeping abreast of it all can be tough. However, if we’re to attract and retain clients from the next generation of investors, then it’s vital to keep up – a prime example of where CPD really is an essential part of our professional life.”

Stanley says he expects responsible investing to factor increasingly into his clients’ expectations, especially when taking in the views of beneficiaries for intergenerational and inheritance planning. 

“As a practice we emphasise long-term and intergenerational planning. Therefore it can be important not only that planning is appropriate for our immediate client, but also that it broadly fits the expectations of the family and eventual heirs. 

“Sometimes this means simply taking into account the interests of family members (typically spouses and children), but sometimes more direct involvement. For example, where planning is explicitly intergenerational in the form of planned bequests, it can be appropriate to elicit the views of the eventual beneficiaries. Where family trusts are involved, clients have sometimes included family members as trustees for the specific purpose of representing what’s sometimes seen as a ‘younger point of view’.”

But how can the IFA community actually incorporate responsible investments into recommendations? 

Mel Kenny, chartered financial planner at Radcliffe & Newlands, says that effective fact-finding is the key that can unlock a world of opportunities within the intergenerational wealth transfer market.

He says: “Questions around one’s ethical stance will uncover whether responsible investments are required for recommendations. Diversification may also be a driver for those who are not driven by green or sustainable issues, but don’t want to be left behind should future returns be driven by younger people influencing firms to be more responsible in their behaviour.”

Kenny also stresses that advisers must start having wider conversations with beneficiaries when they are planning for intergeneration wealth transfer, especially if they want to avoid losing the mandate on the estate.