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5 tips to approach the responsible investment conversation with clients according to Quilter

ESG image

Data from Quilter’s new client profiler tool, launched in March 2022, reveals that just 12% of clients are ‘ESG Dedicated’, meaning they want ESG factors to be a major influence on how their portfolio is managed.

Meanwhile there has been an even split between those who are ‘ESG Focused’ and ‘ESG Aware’. ESG Focused means the client knows what responsible investment means and will take ESG factors into account when selecting a portfolio, whereas ‘ESG Aware’ clients are simply made aware of the ESG rating of their portfolio.

Overall, 56% of clients are either ESG Dedicated or Focused, meaning more than half want ESG factors to play a role – to some extent – in how their portfolio is selected or managed.

Category No. of clients
ESG Aware 917 (44%)
ESG Focused 920 (44%)
ESG Dedicated 252 (12%)

Source: Quilter March-June 2022 data.

The data correlates with Quilter’s expectations in research* carried out with 1,500 people in March 2021, which indicated that 11% of people are ‘ESG dedicated’. The same survey revealed greenwashing to be a major concern for investors, with 44% identifying it as their biggest worry when investing, underlining the need for client suitability assessments matched to the right investment solutions with a clear audit trail.

Quilter’s new tool was launched to support the expanded WealthSelect Managed Portfolio Service which added Responsible and Sustainable portfolios to the range as part of a wave of enhancements in March 2022.

The client profiling tool was developed in collaboration psychometrics experts at Dynamic Planner and is available to all advisers and clients who use the Quilter platform. It assesses client needs across four dimensions – risk, investment goal, investment management style and ESG preference.

David Tiller, commercial and propositions director at Quilter, says: “Suitability is an area that already attracts significant regulatory scrutiny, and it is absolutely crucial that advisers are able to articulate and invest client assets according to their preferences for integrating ESG factors. That’s why our client profiler has proven highly popular with advisers who are now raising responsible investing as part of the standard onboarding and ongoing client review process. 

“The data from the tool shows that responsible investing is not a one size fits all. While the demand for and awareness of investments that actively consider ESG factors has grown over recent years, there are varying degrees of preferences when assessing clients psychometrically. It’s especially important to acknowledge the middle ground of clients who may not be ready for an ESG Dedicated portfolio but who would still like to select their portfolio partly on the basis of its ESG rating.

 “As responsible investing becomes a major theme in adviser-client conversations, advisers need to be able to measure, articulate and audit client preferences.”  

 Five tips to approach the responsible investment conversation with clients:

  1. Raise the topic in the right way and at the right timeMany people will have deeply personal views about the issues underlying responsible investing and failure to bring the topic up correctly risks an emotionally charged discussion. It is therefore best to broach the topic when you have built trust in the relationship, and clients have the context of their financial circumstances.
  2. Don’t project guilt onto the clientFrame the conversation around how people are starting to alter their lifestyles and how this can be translated into investing. The best way to open the conversation is by raising the unraised objection such as: ‘at the risk of you having too many things to think about, there is just one more aspect I’d like to raise with you.’
  1. Don’t base the decision on perceived negative or positive returnsSome clients believe responsible investing means foregoing investment returns. Others think investing responsibly makes higher returns more likely. Unfortunately, over any given time period either could be the case, but it’s impossible to predict.
  2. Don’t get bogged down in the detailWith too much choice, people tend to freeze and avoid taking decisions. Advisers must educate but not over-complicate. People are more likely to relax if they understand that other people they identify with are in the same position and feel the same way.
  3. Empathise with the client’s stanceEmpathising with a client’s stance can reduce misunderstanding and guilt. Ensure the client goes with solutions they feel most comfortable with and will stick to over the long term.

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