Avoiding imposter syndrome when talking about ESG
As investors increasingly seek to embed ESG considerations in their portfolios, specialist adviser Nathan Fradley has offered tips for financial planners who may feel overwhelmed in tackling these complex topics with clients.
Earlier this year, the latest consumer sentiment report by the Responsible Investment Association of Australasia (RIAA) found almost 90 per cent of Australians expect their investments to be responsible and ethical.
This means fund managers, super funds, and even financial advisers face heightened expectations of ensuring client money delivers good returns while also making a positive difference.
However, such expectations can also cause some apprehension among advisers who may not feel well-versed in navigating such conversations around ESG investing, Fradley observed.
Appearing on a recent Fidante webcast, he said: “I think a lot of the self-esteem of an adviser comes back to being the expert in the room and being the person who can solve their client’s problems. Fundamentally, advisers are caring people, and they want to be able to do that. And when something like an ESG issue comes along that they themselves are not an expert in, it can be difficult.
“There can be that thing at the back of your mind of, ‘Can I solve this? Do I know enough about this? Does this client know more than me?’”
In particular, he noted advisers may grapple with feeling like a ‘fraud’ in talking about such topics.
“There might be some really negative feelings around, ‘I feel like a fraud talking about this, I don’t know enough, I don’t know if I can answer the question of whether Woolworths is a tobacco stock because they sell cigarettes and if that actually matters’,” Fradley said.
“My advice there is, you don’t have to be all things. There are plenty of resources, portfolios, experts, plenty of technology that can support advisers. Advisers [can] connect with the client and then find the solutions, like they do in all areas of advice.”
This becomes increasingly important as ethical considerations are viewed to be a given by money managers, Fradley said, noting investor interest in ESG has remained reasonably steady over the years.
“There’s an expectation clients have that [advisers] are considering these things, that investments already do consider these things. It’s not an ‘added extra’,” he said.
Speaking at the RIAA conference in May, James O’Reilly, financial adviser at Northeast Wealth in Melbourne, also remarked that ESG is increasingly seen as “minimum requirement rather than something a client has to ask for”.
He, too, noted that self-confidence can often be a stumbling block for advisers covering responsible investment or ESG; however, he urged advisers not to be afraid to be vulnerable or embarrassed if they didn’t know what a client was asking.
“You have to leave your ego at the door. Advice has evolved over the last 10–15 years and people understand you may not always know the answer, but if you can be vulnerable and have a curious mindset, go away and offer to check what it is they are asking,” O’Reilly said.
Previously, RIAA also sought to address adviser education concerns with the launch of an adviser-focused Sustainable Investment Advice online course “to assist Australia and Aotearoa New Zealand advisers become more confident to engage, research and advise clients who want ethical and sustainable investing”.
Evolving ESG considerations
According to RIAA’s consumer sentiment report, human rights violations, animal cruelty, and gambling are among the top environmental and social issues that Australians want to avoid in their investments.
Reflecting on these findings, Fradley agreed that geopolitical issues remain “front of mind” for clients today.
“Climate change has been such a big topic for so long and there’s probably a little decision fatigue in that,” he admitted.
“But fundamentally, front of mind is geopolitical issues. There’s a number of them going on, and highlighting that with the recent women’s rights rally and the issue around women’s safety in this country – this is a priority for people every single day.”
Additionally, these issues can often be addressed through efforts in a company’s everyday operations and the composition of its board and management teams, leading them to be perceived as “more tangible”, he pointed out.
“People can see and change [this] much more immediately. Climate change feels like such a big problem, it’s something we all want to solve, but it’s enormous,” Fradley said.
The current economic climate has also led to shifting priorities, he suggested, as investors focus more on “survival” amid the cost-of-living crisis.
“People are really focusing more on surviving and then a bit of social, a bit of self-development, but that broader legacy, broader impact on the world – when things are tough, that’s the last thing people can look at,” he said.
“So while they care about these things, it falls away as a priority.”
AUTHOR
Rhea Nath
Recommended for you
Global investment consultancy bfinance is expanding into offering services for wealth managers as they seek advanced investment strategies for their clients.
Far too few wealth managers are capitalising on the opportunity presented by disruptive technology to deliver personalised investment solutions to the mass affluent demographic, according to PwC.
With over half of advisers using managed accounts, HUB24’s head of managed portfolios has unpacked the benefits driving their usage and how they can be leveraged by advice practices.
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
