IFAs urged to build ESG questions into fact finds


The majority of advisers include a question on ESG investing at some stage of the fact find, new research suggests, but there is still a way to go for some before new rules make it compulsory.

A NextWealth study finds that 78 per cent of advisers include information about ESG, ethical, impact or sustainable investing as part of their know your client process.

The same proportion agree that these kind of questions should be included under the FCA’s KYC heading.

And while ESG is raised in some 17 per cent of client conversations, a jump from 7.5 per cent this time last year, questions remain as to whether advisers are going far enough, given Mifid II rules coming into effect next March will require IFAs to take a client’s sustainability interests into account when recommending a product.

ESG: Why should advisers care?

The fact find questions mostly fall under the ‘ethical’ heading, the research finds, with 64 per cent doing so. Far fewer discuss sustainable or impact preferences.

Source: NextWealth

Under the Mifid II rules, advisers have to evidence the process they used to ascertain the sustainability risk of funds, as well as understanding the client’s attitude to ESG issues.

NextWealth managing director Heather Hopkins says: “We think ESG integration needs to happen at the adviser proposition level first. Most clients will be happy with an ESG-integrated core investment proposition and won’t need expensive bespoke solutions.

“Articulating a view on ESG principles as part of the values of an advice business, will ensure alignment with client needs. In the needs assessment, the challenge for advisers is to integrate a conversation about financial and non-financial goals without falling down rabbit holes that will lead to unnecessarily expensive bespoke solutions.”



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