Both large and small advice firms are now talking to their clients about ESG investing but while larger ones are more likely to be approached about ESG, smaller ones are quicker to implement it.
Research from NextWealth, out today (October 21), showed clients of larger firms were more likely to raise the topic of ESG but smaller firms were more likely to have clients actually invest in ESG products.
Across firms the percentage of clients raising the topic of ESG has increased steadily in the past years, from 7 per cent in 2019 to 20 per cent in 2021.
But for advisers in larger firms, with more than 50 employees, the share is even higher, at 26 per cent. Interestingly, for one-man bands the share is also above average, at 23 per cent.
However, when it came to putting their money in ESG products, smaller firms were pushing the average up, from 18 per cent of advised assets in mid-size firms to 20 per cent overall.
Heather Hopkins, managing director of NextWealth, said there was a noticeable change in the number of financial advisers who were comfortable discussing the subject of ESG.
“Just six months ago we found many were reticent to discuss this in much detail with clients for fear of exposing their own lack of understanding," she said.
“Speaking with advisers for this report, it’s clear that many have moved quickly to become comfortable raising the subject with clients and they are approaching the topic from multiple angles.”
The report showed just 3 per cent of advisers had no client assets invested in ESG, compared with 10 per cent in 2020 and 7 per cent in 2019.
NextWealth's report is based on the Financial Business Benchmark survey which questioned 278 advisers, as well as a specialist ESG survey of 104 advisers between July and August this year. It also includes information from in-depth interviews with 9 advisers in September.
Emma Wall, head of investment analysis at Hargreaves Lansdown, said the incoming ESG regulation for sustainable investing meant advisers are now having to ask clients questions around ESG.
“You have to have this responsible investment question in the fact find, so all new clients have those conversations prompted by the adviser," she said.
"So, I would say of that initial conversation, it’s 100 per cent adviser-led because of that prompt. However, on an ongoing basis I would say it probably is more client-led, and particularly among the younger client base.”
The Treasury and Financial Conduct Authority announced this week (October 19) that they are exploring sustainability-related rules for financial advice.