Ready or not? Research reveals differences in preparedness as advisers brace for ESG demands

• 80% advisers believed regulation around ESG fact find to be positive
• Fewer than 20% said ESG already fully integrated into their business
• 92% said small number of suitable products was an issue
• Over 80% found matching client aims to a specific ESG strategy challenging 
• ‘Impact investing’ most problematic ESG term for advisers

With upcoming MiFID II measures set to compel advisers to ask clients about ESG, recent research commissioned by Rathbones1 questioned advisers on how they are preparing for a more ESG-focused future.

Every adviser surveyed said they expected ESG to play a more important role over the next five years with nearly half (48%) saying it would be ‘significantly’ more so. 

While client demand was cited by 63% of advisers as a current and future motivation for including ESG in the investment process, advisers said they are also feeling increased pressure to act because of wider attention given to issues such as climate change (45%).  

Regulation

While it is not yet compulsory for advisers in the UK to ask clients about ESG investing, 56% of advisers believed it was already part of the fact-find; and for many it may well now be a part of their own process. In fact, ESG is set to be a part of the MiFID II sustainable finance measures, scheduled to come in to play in early 20212. Four-fifths (80%) said that being made to ask about ESG will be a positive development.

Ready or not?

However, while the study provides a groundswell of opinion that ESG will be playing a part in advisers’ futures and is overwhelmingly viewed as positive, less than a fifth of advisers (18%) said ESG advice is already fully integrated into their business. A further 28% described it as partially integrated and 54% said it is only relevant to specific clients or parts of portfolios currently. Interestingly no one commented that ESG played no role in their business. 

Knowledge gaps

More than three quarters of advisers were confident around the terms:  ‘ESG’, ‘socially responsible’ and ‘ethical’ in relation to investing. However, the term impact investing proved problematic with 60% saying their understanding was ‘weak or ‘very weak’.

Term

Impact Investing

ESG

Socially responsible

Ethical

Weak/very weak understanding

60%

25%

22%

19%

Strong/very strong understanding

40%

75%

78%

81%

Further findings included: 20% of advisers claimed to understand the difference between the above terms, but were unsure how to apply them to their portfolios; 13% said they thought the terms were interchangeable; and 3% reported that they did not understand the difference between the terms.

Supporting advisers to support their clients

Just over a third of advisers (34%) expressed that they needed more support on introducing ESG investing to their clients and 61% had concerns about their clients’ lack of knowledge. 

When it comes to ESG investment selection, 92% felt the small number of suitable products was an issue. And more than four-fifths (83%) suggested that they found matching client aims to a specific strategy challenging. 

When offered a choice of one or more approaches, 65% of advisers expected to use a centralised investment proposition (CIP); 53% said they would delegate to or partner with a DFM and 43% said they would deal directly with fund providers.

Once ESG investments have been aligned with a client’s values, advisers will be looking for partner support when it comes to maintaining continued suitability. Online resources (69%); DFM engagement (56%); training sessions (55%) and reading materials (54%) will all be highly in demand.

Mike Webb, chief executive, Rathbone Unit Trust Management, said: “The project has been fascinating, and underscores how well advisers recognise the importance of ESG now, and the steep trajectory on which it is set. With or without a MiFID II mandate, the study reveals more needs to be done, and advisers are seeking partnership and support, in terms of both knowledge sharing and physical collateral. There are gaps in ESG strategies and product ranges, suggesting adviser businesses and providers need to work closely together to ensure clients’ values are met with suitable products and services.”

The Value of ESG adoption within today’s adviser world report can be downloaded here 

For further press information, please contact:

Madhu Kalia
PR - Rathbones
020 7399 0256 or 07825 596302
madhu.kalia@rathbones.com

     Sam Emery/Emma Murphy
Quill PR
020 7466 5056/5054
sam@quillpr.com/emma@quillpr.com

Notes to editors

1. The findings in this report are based on data collected from 100 UK advisers (carefully selected by CoreData Research) during November and December 2019. The sample was split in half – 50 advisers with 20% or less of their book of business in ESG investments and 50 advisers with 60% or more. CoreData also carried out deep-dive telephone interviews with 15 advisers. 
2. Source: FTAdviser 

Rathbone Unit Trust Management

Rathbone Unit Trust Management Limited is a wholly-owned, London-based subsidiary of Rathbones Group Plc. In 1995 and 1996 respectively, Rathbones Group acquired stockbrokers Laurence Keen and Neilson Cobbold, securing many private wealth managers, and their clients. The company also acquired unit trusts from Laurence Keen Unit Trust Management including the Rathbone Income Fund - the success of which led to a rebranding of the operation in 1999 to Rathbone Unit Trust Management Limited. Through its subsidiaries, the parent company manages £49.4 billion of client funds, of which £8.0 billion is managed by Rathbone Unit Trust Management Limited. (As at 30 June 2020).

About Rathbones Group Plc:

rathbones.com

Rathbons Group Plc, through its subsidiaries, is one of the UK’s leading providers of investment management services for individuals, charities and professional advisers. This includes discretionary investment management, unit trusts, tax planning, trust and company management, financial advice and banking services. The company has over 1,500 staff in 15 locations across the UK and Jersey.

This is a financial promotion relating to a particular adviser survey. Any views and opinions are those of the advisers surveyed and spokespersons mentioned, and coverage of any assets held must be taken in that context and in no way reflects an investment recommendation. This note is for use by investment advisers and journalists, and must not be circulated to private clients or to the general public.  Past performance should not be seen as an indication of future performance. The value of investments may go down as well as up and you may not get back your original investment.