Discovering the ethical phenomena
Recognising ethical clients, taking the time and paying attention to their specialised needs is the way forward for ethical investing, according to a panel of industry figures presenting their views at the recent FPA convention.
Corporate Monitor principal Michael Walsh described the alternative asset class to delegates as a ‘phenomena’.
“Acknowledge this [ethical investing] is an unusual phenomena in the market, an investor-driven phenomena,” he says.
Walsh went on to counter the argument that socially responsible investing (SRI) has lower returns than traditional asset classes. He named a number of funds achieving what he called credible long term returns, such as the boutique Hunter Hall funds and the BT Ethical Balanced Fund, a fund which has been in existence for 17 years and has a 14.12 per cent return rate.
Also a positive for the steadily increasing ethical investing market was the minimal downturn reation in the asset class post September 11, Walsh says.
“SRI funds have done well in the period of negative returns.”
Looking ahead while the case for SRIs is strong, according to Walsh, good and bad performances will continue and getting the management right is crucial for ethical investing.
Westpac Investment Management portfolio manager Erik Mather believes the secret of SRI as an investment style is portfolio construction, as well as looking at the reasons a client would not invest in ethical funds, rather than only concentrating on the reasons they would do so.
“Ethical is not an investment problem, people are signalling they want more information. The problem is in the communication,” he says.
Communication with clients was also one of the keys for Ethical Investment Services princpal Janice Carpenter.
“Spend more time with clients when you’re going to include ethical in their portfolio,” she says.
“Ask them what is important to them, spent time talking and understanding the client and try to rate their concerns in the same way you would rate risk.”
Carpenter also looked at the psychology of ethical clients, and ways of recognising who they are through their profession and the questions they ask.
Remembering that clients can be inconsistent, and can have strong views on particular topics but still hold shares that counter the issues, was also an important factor in understanding the client, Carpenter said.
“Humans are like that, they have strong views and it is not always easy to be consistent in ethical investing. They might just want to taste the water, and try abit of ethical.”
Recommended for you
Insignia Financial is targeting its salaried financial advisers increase their revenue per adviser by 62.5 per cent over the next five years.
AWAG and Teaminvest Private Group have teamed up to offer a succession lending fund to help advice principals navigate succession planning and enjoy their retirement.
LGT Crestone chief executive Michael Chisholm believes the firm was chosen to acquire Commonwealth Bank’s personal advice arm due to its strong private market capability.
Advisers will now be able to tap into global markets on the platform through international signature managed accounts from global managers like T. Rowe Price and Lazard.
