‘Leave your ego at the door’: Being confident about ESG
Adviser willingness is the key hurdle to the uptake of ESG matters by financial advisers; they should not feel afraid or embarrassed if they are less familiar with what clients are seeking.
In a session at the annual Responsible Investment Association Australasia (RIAA) conference in Sydney, a panel discussed the obstacles in the way of ESG uptake by financial advisers.
Research in the organisation’s annual benchmark report earlier this year found 88 per cent of the 2,000 clients surveyed said they expect their investments to be responsible and ethical.
Kathryn Fitch-Daniels, responsible investment adviser at Ethinvest, said: “Adviser willingness is the biggest hurdle as everything points to the clients wanting it. But at the same time, it is obvious to the client if you aren’t engaged with it or don’t believe it and haven’t bothered to learn about it. You can’t force an adviser to do it.
“These advisers may be able to retain clients at the moment because there is a shortage of advisers, but how long will that last? ESG has become so mainstream that how long can you keep avoiding it?”
Fellow panelist, James O’Reilly, financial adviser at Northeast Wealth in Melbourne, said confidence is often a stumbling block to advisers covering responsible investment or ESG. His firm has moved to 100 per cent responsible investment with a focus on sustainability; he described the move as making ESG a “minimum requirement rather than something a client has to ask for”.
Adding a question about ESG preferences to his client questionnaire increased client interest of responsible and sustainable options from 10–12 per cent to 61 per cent, he said.
He recommended that advisers shouldn’t 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.
“Advisers have a huge opportunity and a huge responsibility as they are the gatekeepers of clients’ money, and clients want our leadership and help, and they want us to know broadly how to get the right outcome.”
Fitch-Daniels added that her firm has moved away from questionnaires on preferences to asking clients to tell them what their specific concerns are. Like O’Reilly mentioned, it is then up to the adviser to do their own research on these matters and how they can be incorporated into a client’s portfolio.
“Otherwise everyone wants to tick every box so it’s better to have a blank slate and allow them to write down their concerns and what they mean to them, and we find we get a lot of different things mentioned.
“Then you can go away and do your own research; it’s always evolving and you have to keep on top of it and show your clients that you are keeping on top of it.”
AUTHOR
Laura Dew
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