ESG imbalance between client and adviser

Dave Rae responsible investment association of australasia research affiliates

11 November 2021
| By Laura Dew |
image
image
expand image

There is an imbalance between advisers and clients over who brings up the topic of environmental, social and governance (ESG) investing.

Speaking to Money Management, Dave Rae, adviser at Federation Financial and a member of the Responsible Investment Association of Australasia (RIAA) certification panel, said advisers should not use ESG only if the client demanded it.

He said: “According to the RIAA, 86% of Australians expect the adviser to ask them about ESG. It is not the case that the client will necessarily raise the issue, they are waiting for the adviser to bring it up.

“There was a reluctance from advisers in the past because they didn’t have enough knowledge about it but now clients expect it.”

The RIAA research also found 90% of consumers felt it was important their advisers provided responsible or ethical options and 87% felt comfortable discussing their values with their adviser. 

However, this contradicted research by Research Affiliates that advisers’ use of ESG strategies was driven by client demand. In its global report, it found client demand was the primary motivation for 63% of advisers who used ESG strategies.

The study also found advisers lacked a written policy on ESG and preferred to discuss it face-to-face.

Rae said: “That doesn’t surprise me, ESG is not an area where advisers have done well and a structured approach would be valuable so they know what they are going to bring up with clients and have a clear policy on it”.

A written policy would also help to ensure that advisers went through the same ESG process with each client rather than waiting to hear their preferences.

He also said clients were seeking more quantitative data on how their investment was contributing in a positive way, which could be difficult to provide as there wasn’t a standardised approach to reporting.

“Integrity of data is a problem, you won’t ever get 100% accurate reporting. The non-financial metrics are a good starting point and they will improve over time thanks to regulation coming out of the European Union,” Rae said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Interesting. Would be good to know the details of the StrategyOne deal....

4 days ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days ago

increased professionalism within the industry - shouldn't that say, FAR register almost halving in the last 24 months he...

4 weeks 1 day ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 3 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

2 days 22 hours ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days 1 hour ago