IFAs needs to stop prioritising ‘growth at all costs’

Speaking to FTAdviser, Rebecca Kowalski, owner of a sustainable investment consultancy Overstory Finance, said she’s not naive enough to think that that growth isn't needed but urged IFAs to look further.

"I just think that growth at all costs, or maximum growth should not be the thing that IFAs use to attract the client and retain the client," she said. 

“This is obviously a big ask, but in years to come when young people are running the show more, I can see it happening that the value offered by an IFA becomes much more than just the growth you can achieve for a client every year."

Kowalski explained that there is so much more that IFAs can offer than that.

"Once the conversations and the dialogue start opening up, we can start moving away from that and stop resting everything on what great asset selectors we are," she said.

For me, it was the concept that my firstborn, who I always imagined will be a fantastic mother, was quite possibly not going to give me grandchildren anymore Rebecca Kowalski, Overstory Finance

Having worked in financial advice for over 25 years, Kowalski moved from paraplanning to a role in compliance and sustainability management before she decided to go out on her own in 2021.

She set Overstory finance up in August last year to help financial advisers embrace sustainable investing and “remove hurdles” that stand in their way.

Fundamental to the company’s approach is the fact that everyone shares the same carbon budget and finite natural resources, with Kowalski arguing that we need to move to an economic and social system “in which both people and planet can thrive”.

Kowalksi has always had an interest in sustainability, but said it was her daughter who was the biggest influence on her when it came to changing her career. 

It was when her daughter, Jen, told her she didn’t want to have children anymore because of the impact of climate change that Kowalski decided she needed to do more.

“Everybody has a trigger that makes them engaged with this stuff. For some in the world, it might be that their house has just flooded, but for me, it was the concept that my firstborn, who I always imagined will be a fantastic mother, was quite possibly not going to give me grandchildren anymore. 

“That was the thing that really made me prepared to not just do this as part of my job, but to actually disrupt and go the extra mile to try and do as much as I possibly could in my own way,” Kowalski said.

Industry response

Overstory Finance works with advice firms on a bespoke basis, and offers one-off assistance or ongoing support with investment strategy, compliance requirements, client communications and staff training.

On the whole, Kowalski has had a positive response from the industry so far. 

“For me it’s not about making money, it’s purely to try and make a difference within the industry and try and make a personal impact on where I think financial services can go in the general campaign to try and do something about environmental damage and climate change.”

Many of the firms Overstory work with want help with investments and how they should position themselves.

It's not about ticking all these compliance boxes Rebecca Kowalski, Overstory Finance

“A lot want help around how to discuss this with clients - how to explain it, how to deal with tricky questions," she said. "And how to not make it sound like what they did before was wrong or substandard.

"Some firms have been brilliant, they've already done quite a lot of work and they just want another opinion on it. Maybe to sit on the investment committee, or just review some of their policies and processes that they've designed."

Other firms have now moved beyond an initial point of engagement with sustainable investing and now use Overstory for support with client communications and messaging.

Despite receiving a generally positive response from the industry so far, Kowalski acknowledged that not all firms want to engage with her publicly.

“I get a lot of behind the scenes support," she explained. "It's difficult for a lot of people who are working for larger companies, they maybe have to follow a company line a bit more. But the best thing for me about Overstory is being independent and having a completely unfettered voice.

“I've really enjoyed the fact that I've been given a voice, that is important to me. I've been writing a lot of articles, speaking at conferences and I think that makes a difference. The more conversations about these issues, the more it makes them approachable and accessible,” Kowalski said.

'Messy period'

In Kowalski’s view, the industry could do a lot more to mitigate and adapt to the impact of the climate crisis.

“I think we're in a very messy period at the moment,” she said and highlighted the momentum that was there for sustainable investing during lockdown when people had more time to think about new projects.

“It didn't do any harm, that these funds were skyrocketing up the charts, but then, it all fell back.

“I don't think that was a bad thing - it was bad that people’s investments went down in value, you didn't want to see that - but I think we needed to have that reset and make people realise that you can't push this just on performance,” Kowalski said.

In her view it was important that people realised that a sustainable fund won’t always perform better than others and that there will be volatility.

“It was important that everybody realised that and that we can all now incorporate that into our conversations and how we present to people,” she said.

Incorporating sustainability

Kowalski’s top tip for financial advisers who want to do more in this area is to keep it simple and accessible.

“It’s just getting so complicated. It's not about ticking all these compliance boxes, it's more about making sure that your client has a good experience and can do what they set out to do," she said.

“Don't get too caught up in thinking about, ‘Oh, I've got to have a five page long questionnaire that they've got to fill in’ and all the things that make it harder to do sustainable investing than it is to do normal investing."

She explained that it is also important to find a way to talk about it that you are comfortable with.

This might be having a face-to-face or phone conversation about it or choosing to send out a guide. IFAs should choose whatever method of conversation works for them, she said.

“We need to educate clients and we need to make sure they are aware of the opportunities that are available to them. We're actually making sustainable investment a lot more complicated than it has to be,” she said. 

UK and EU regulation is a perfect example of this, according to Kowalski. 

“It's all intended for the right reasons but this transition period is the horrendously complicated phase. You have to try and put it in a way that the clients can understand it. 

“We have to have a certain amount of knowledge, we shouldn’t be dumbing it down. As an industry, we need to understand what all this stuff means but then we have to put that depth of knowledge aside and make it simple for clients.”

Kowalski said another tip for advisers was that every firm should have access to an expert. 

“I’m not saying that to promote myself," she said. "There’s a lot to know to really understand this stuff properly. It could be a graduate trainee advisor or paraplanner, for example.

“Give it to somebody who really wants to get to the bottom of it and really does understand and have an interest in it. That helps bring it to life."

She added: “Whether that person then trains the team, or pops into client meetings to do the sustainable investment session, it really helps.

 "This is a specialist area, and it should be treated that way."

jane.matthews@ft.com