UKSIF, the UK Sustainable Investment and Finance Association has warned financial advisors that they face a revolt from investors if they ‘fail to meet the demand for sustainable investment options’.
UKSIF chief executive Simon Howard believes that investors will move to robo-advisors and comparison sites that provide free investment advice if do not cater to the eight out of ten investors interested to learn more about responsible investing products. The statistics come from a recent survey conducted by The Wisdom Council.
Investment Association data suggest that at present, only 1.3% of retail investors’ assets under management are in ‘ethical strategies’.
There appears to be a knowledge gap that retail investors are not happy about. While there are funds and other investment vehicles on the market that align with the values of investors who want to invest their assets responsibly, another finding of The Wisdom Council’s survey is that only a quarter of investors are aware of their existence.
Some financial advisors are now making an effort to put together ethical and sustainable model investment portfolios, usually in circumstances when a particular client or clients have been insistent in their demands for this kind of solution. Once they’ve gone to the effort to put together an ethical portfolio they will often then offer it to other clients and feedback has been that the level of demand has surprised them, with significant take up.
FE (Financial Express), a financial products data, research and analysis service for financial advisors, commented that they have noticed that advisors have been using their service to put together ethical portfolios themselves due to the lack of ready-made options available. Candriam Investors, an asset manager, also announced this week the launch of the Candriam Academy, a free-to-use training platform for financial advisors and intermediaries, designed to educate them about socially responsible investing.
Parmenion, a tech-focused investment platform for advisors and one of the fastest growing money managers in the UK, offers four ethical investment approaches across 10 risk grades. Part of Aberdeen Asset Management, Parmenion says the assets under management within the four portfolios has been doubling approximately every 18 months since they were launched in 2012.
Andrew Gilbert, an investment manager at Parmenion explains the success of the ethical funds as nothing more than a reflection of wider consumer behaviour:
“You go to the supermarket and you buy fair trade bananas, you buy a solar panel, you have insulation in your loft when you come home, you recycle your milk cartons.”
Many investors, says Gilbert, are unaware a similar approach can be applied to their investments or ISA, but when they do, they are keen to go down that route.
Answering retail investor demand for ethical products is also considered as a way to restore trust in the City. Amanda Young, head of responsible investing at Aberdeen Standard Investments commented:
“For millennials as a whole the financial industry is not trusted and we need to build that back up.“
However, it looks as though the demand for free investment advice, and advised investment advice, on ethical products is being belatedly recognised. Next month recommendations on how to reestablish the UK and City of London as a global leader for social impact and socially responsible investing will be presented to Government.