ESG considerations and financial advice – Questions to consider including in your client fact finds and annual reviews

28 April 2020
In the final instalment of this trilogy, Ryan Medlock discusses the type of questions that can be integrated into the advice process to probe clients’ ESG preferences.

You may have been providing financial advice for two, three or maybe even four decades, and you may never have been asked any questions at all by your clients in relation to responsible investment and ESG factors. This could well change over the next couple of years due to regulatory change and societal shifts.

Embedding ESG considerations within your client fact finds and annual reviews can ensure that you continue to provide a service and proposition that meets the evolving needs of your clients. It could also put you in a prime position to take advantage of this new customer demand pool which is emerging around responsible investment. This demand pool doesn’t just include millennials; it also includes those individuals who have yet to enter the advised market. To an extent, this can help future-proof your business.

Talking to your clients about ESG

We've created the following articles to support conversations around ESG. Click the links to open in a new tab.

What should you ask?

Upcoming changes to MIFID mean that soon, you’ll have to find out a client’s ESG preferences as part of fact finds and annual reviews. Some questions you might want to ask include:

  • How strongly do you feel about environmental factors such as climate change, and a company’s environmental footprint and activities?
  • How strongly do you feel about issues involving corporate governance (the way a company is run)? What about social issues such as diversity, equal opportunities and working conditions?
  • How important is it to you to invest in companies that take environmental, social and governance - or ‘ESG’ factors - into account?
  • Are there any particular sectors or industries you’d wish to avoid, even if meant you would potentially earn less on your investment?

These are just some examples, but they help uncover a customer’s basic feelings about ESG, the level of importance, and how it relates to their overall feelings about their returns. More information about suitability reports and fact finds will be available later in the year to help support these conversations.

In conclusion

There is so much new market information on ESG around that it can be confusing to understand the differences between each approach. The Responsible Investment Framework from the Investment Association (IA) is a useful guide that explains key terms as well as a closer look at different RI components.

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About the author

Ryan Medlock

Senior Investment Development Manager

Ryan’s journey with Royal London began back in 2008 after starting his career in compliance with Norwich Union. As an Investment Proposition Manager, Ryan contributed to the growth and development of Royal London’s Governed Range before moving to Aberdeen Standard Investments for a stint in the Strategic Client’s relationship team. Ryan returned to Royal London in 2018 with a focus on exploring adviser angles amongst complex regulation and investment themes. Ryan is responsible for engagement with the advice community and investment industry initiatives, presenting, writing articles and commenting for the press and holds the CFA Diploma in Investment Management (ESG). Ryan is particularly proud of the fact that he finished 952nd in the 2008/09 edition of Fantasy Premier League.

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