Integrating responsible investment into advice propositions

11 October 2021
Listen to Fiona Hanrahan and Ryan Medlock in our latest podcast as they explore some of the practical steps that financial planners can take to embed responsible investment considerations within their advice processes.

Fiona Hanrahan and Ryan Medlock from our Intermediary Development and technical team take a deeper dive into responsible investment, how financial planners can start to add responsible investment to their client conversations, how planners can approach fact finding and other key considerations when looking at responsible investment. 

Fiona Hanrahan

Hello, I'm Fiona Hanrahan and I'm with Ryan Medlock today. We're going to talk about integrating responsible investment into advice propositions and Ryan is going to answer my questions. So, Ryan, there are issues with terminology, and perhaps a lack of clarity, so just where do financial planners start, when looking to embed responsible considerations within their processes.

Ryan Medlock

Well, I think the first step is, very much a cultural step, so, you know, internal discussions and integrating responsible investment into a firm's core values and articulating those values to clients, that type of thing.

I think the de facto starting point, at an individual planner level, has to be getting your head around the vast range of terms that are used in responsible investment. So I'd advise planners to familiarise themselves with the investment associations framework on Responsible Investment. There's then a whole host of educational resources that planners can tap into to strengthen their overall understanding. So you've got things like the UN PRI website, the MSCI website, PIMFA’s ESG Academy and you've also got various policy papers, which have been published as well.

Fiona Hanrahan

That's great Ryan. But let's tackle the elephant in this virtual room. How do planners start a client conversation on responsible investment?

Ryan Medlock

That’s a good point because I actually think before a couple of questions just bolted into client fact finds, I think it's important to flesh out a client's interest and motivation in this area through some form of client engagement exercise, now in terms of a conversation starter it might be talking about something that happened in 2020, so, you know, one of the extreme weather events, or perhaps a prominent governance failing, something like boohoo, as an example. It might be COP 26, which is taking place in Glasgow in November 2021. It might even be a David Attenborough programme. It doesn't have to be anything sophisticated at all. As I say, I think it's really, really important to just sense client's needs in this area, before moving into formal fact finding.

Fiona Hanrahan

And when it comes to the point of fact finding then, do you have any thoughts on the approach or the type of questions that planners can adopt?

Ryan Medlock

Well, I think there's a number of different approaches that firms could take here, and obviously there's no right or wrong answer. I think my recommendation would be to integrate a number of open questions into standard fact finds. I think that way, that ensures that client responses can be recorded as part of the standard process, and then perhaps you know, using an additional questionnaire for more probing questions, which gauge client preferences. But as I say, no right or wrong approach here. I think good questions are going to be open questions that pull out an identify client values and then lead into a broader conversation relating to ESG issues and the different responsible investment approaches.

Fiona Hanrahan

Thanks, Ryan, are there any other considerations worth thinking about?

Ryan Medlock

Sure. You know, it might be useful to think about grouping clients into segments from a responsible investment perspective. I think there's a number of advantages with that. You know, firstly, it can be fed directly into prod, target and market analysis work. So that's going to help advice firms from a regulatory perspective. And secondly, it can also help firms map out just where the responsible investment opportunity sits across the client bank and help identify what solutions to use, there’s then, you know, the threat of greenwashing, which advisors really need to look out for. You know, there was a stat published by two degrees in 2020 that I read, which stated that eighty five percent of funds labelled green, had misleading marketing.

Fiona Hanrahan

Wow, eighty five percent, that's pretty shocking.

Ryan Medlock

That’s downright horrific. So, you know, Yeah, in that context, I think it's essential that, you know, planners try and incorporate responsible investment considerations into their research and due diligence processes, and, you know, that will then allow planners to identify which investment firms are effectively trying to monetize this trend and jump on the bandwagon.

Fiona Hanrahan

Thank you so much Ryan

Ryan Medlock

Thank you.

This website is intended for financial advisers only and shouldn't be relied upon by any other person. If you are not an adviser please visit royallondon.com.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.