Top 3 ways the Ethical Advice Accelerator solves common adviser concernsApr 21, 2022
The topic of ethical investment has historically had the reputation of being too hard, too confusing or not worth the returns. These misconceptions have meant financial advisers are missing out on opportunities to connect with valuable clients, as well as holding themselves back from being industry leaders in this fast-growing area of finance. More and more frequently, studies are showing us that the public is ready for ethical investments. These studies also illustrate the number one thing holding investors back from ethical investments is the lack of knowledge from their financial advisers.
So what are the top concerns financial advisers have when it comes to ethical investments?
And how can advisers proactively solve these concerns via the Ethical Advice Accelerator program?
To understand the concerns that advisers are having, we need to look at the history and rise of ethical investing to date and acknowledge when it began the move from a niche investment area to a topic that many investors are expecting when they liaise with their financial advisers. In 2005, a report called “Who Cares Wins”, authored by Ivo Knoepfel, was released, stating that “embedding environmental, social and governance [ESG] factors in capital markets makes good business sense and leads to more sustainable markets and better outcomes for societies.” (Forbes, 2018). This report, along with the “Freshfield Report”, produced by the UNEP/FI, allowed the Principles for Responsible Investment and later, the Sustainable Stock Exchange Initiative to be formed.
With the foundation of organisations and frameworks like this, ethical investments began to grow rapidly. However, despite the strong base of information and support provided, there were road bumps along the way that slowed down the mainstream success of ethical investing. Advisers made the claim that their fiduciary duty to investors was with returns, regardless of the environmental or social impact of those investments. The lack of available data was also a concern, leaving advisers unsure of where funds and companies sat with their processes and policies. It wasn’t until 2014 when early studies began to emerge, showing investors who applied ethical investment techniques were seeing excellent returns, that the finance world began to take notice.
From then, changes in compliance requirements began to encourage advisers to discuss the long-term impact of their investments, negating the belief that fiduciary duty stopped at returns. “Under the FASEA code, it is explicitly stated that advisers are required to consider the broader long term interests of their clients. The code’s explanatory notes also state that advisers should limit their product recommendations to responsible and ethical products where appropriate.” (Independent Financial Adviser). Likewise, with company data being increasingly available to the public online, it is becoming easier to uncover a company’s policies and processes and gain an understanding of its ESG standing.
Despite the initial road bumps, the majority of concerns were disproven and ethical investing continued to grow into a strong force in the finance sector and growing even more rapidly now as investors make a stand about where they want to see their money invested. As reports continue to show ethical investments performing alongside and oftentimes ahead of mainstream investing, the future is clearly in favour of investments that consider ESG factors.
However, one bump in the road remains and it is slowing down the continued progress of these investments.
Financial advisers are not keeping up with the demand from investors for ethical investment advice, due to a lack of education in the field.
A recent article in Investment Week states, “Clients are interested in sustainable investments but a lack of knowledge is the biggest barrier to sustainable investing according to a study commissioned by Invesco.” With the success of ethical investments continuing to rise and the public clearly stating that knowledgeable advisers are crucial to their investment decisions, it is time to prioritise professional development and take the steps to be a leader in this field. The Ethical Advice Accelerator is the fastest way for Australian financial advisers to gain the knowledge required to become these industry leaders.
More than two-fifths (42%) of advisers pointed to a lack of knowledge being the biggest barrier when allocating to sustainable strategies. (Investment Week)
The number one benefit of the Ethical Advice Accelerator is the up to date, trending and relevant information sourced and delivered to participants in the program.
Course facilitator, Alexandra Brown, is the Co-Founder of Altiorem - a not for profit library and resource centre that:
- Helps people understand the role finance must play in addressing sustainability challenges and building a better future for all.
- Supports advocates for sustainable finance in making stronger arguments for change, and implementing solutions with real impact.
- Helps a new generation of leaders gain a solid understanding of critical sustainability issues and their relevance to business and finance.
A carefully curated selection of resource materials and course content, as well as the tools to find the information that matters, means that financial advisers are provided with the insights that will be most helpful to them - no more searching for information all over Google and trying to collate bits and pieces as they are needed. With the right knowledge, advisers are armed with the confidence to advocate for ethical investments and make clear and concise arguments in favour of investing with client values and ESG considerations.
The Ethical Advice Accelerator educates financial advisers on where and how to find further ethical investment information, as well as the tools to develop their own knowledge base on the topics that are relevant for them and their clients. There are a growing number of resources available to financial advisers regarding ethical investments, the Accelerator program introduces and shows advisers how to make the most of them, for efficient building of knowledge and reference.
Two-fifths (45%) of advisers say the difficulty in spotting ‘greenwashers' is another obstacle in advising their clients on sustainable investments. (Investment Week)
The difficulty of spotting ‘greenwashers’ is a concern for many financial advisers and one that has been thoroughly addressed in the Ethical Advice Accelerator. Greenwashing refers to a product, fund or company that appears to be more ethically minded than they really are, due to clever marketing and careful skirting around requirements and sustainability issues. This is a concern for advisers, as accurately aligning products to their client’s values and requests is a key element in building a trusting and long-standing client/adviser relationship.
The Ethical Advice Accelerator provides insight on the most common forms of greenwashing, how to avoid recommending companies and funds that are using greenwashing techniques, and how to discuss these issues with your clients so they are aware of greenwashing risks and assured of your expertise in avoiding them.
More than two-thirds stated that educational seminars would contribute to continuing professional development (CPD) - almost half (46%) would like client-facing educational materials, while 42% would like more online tools or support in the initial fact-finding missions. (Investment Week)
The Ethical Advice Accelerator delivers continuing professional development (CPD) points to advisers completing the program. It also upskills participants through masterclasses and workshops throughout the modules. Most crucially, the Ethical Advice Accelerator is available as ongoing online access for anyone who registers, for the life of the program. This means you will have the most up to date resources, tools and information to refer back to, even once you’ve completed the program.
Throughout the history of ethical investing, we have seen that adviser concerns can be quelled. With an increase of investors looking for ethical advice, it is simply no longer an option for advisers to ignore ethical investments.
The Ethical Advice Accelerator is an interactive and easy to understand resource that will provide you with the foundations and ability to build on your knowledge as you gain further understanding. The confidence to have meaningful conversations with clients about their values and preferences will build client rapport, furthering stickiness and the opportunity to be known as a leader in supporting clients through ethical investment. Having a program behind you as your comprehensive guide to ethical investment, you can be more equipped for best practice advice. Your willingness to hear your clients' values and preferences, along with the tools and knowledge to aim towards alignment, will show you are here to work with them to make sustainable and positive impacts on the world.
This information is issued by Ethical Invest Group (EIG) (ABN 29 238 432 149) in relation to the trend toward sustainability in financial advice.
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