How is RIAA engaging with financial advisers?

Simon O’Connor, chief executive of the Responsible Investment Association of Australasia (RIAA) has shared how the organisation is engaging the financial advice community.

Adviser delegates at the RIAA’s national conference last week were up from 75 at last year’s Sydney event to 150 at this year’s event in Melbourne. 

One area he acknowledged was difficult for advisers was the volume of information available to them, which advisers said they found overwhelming to understand. An earlier panel at the conference had warned that this was unlikely to cease as compliance standards grew.

Another issue that contributed to this influx of data was the lack of alignment between global jurisdictions.

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“What’s missing is clear classification of what each type of product is; impact, sustainable, green, ESG, responsible.

“We need to align with global standards and there is a real gap in the market around classification of different funds. The absence of this standard is proving problematic with ASIC [the Australian Securities and Investments Commission] cracking down on greenwashing.” 

His concern was that funds may meet the standards set overseas, such as the Sustainable Finance Disclosure Regulations (SFDRs) in the European Union or the Sustainable Financial Regulation (SFR) in the UK, but not in Australia, and then fall foul of ASIC enforcement action.

To help with this, he said RIAA planned to bring its own star rating system for advisers in the second half of the year.

“These will map closely to the SFDR and to the SFR in the UK to give alignment. Fund managers are already having to meet these requirements because they operate globally, so this will provide an aligned approach for Australia.

“We need third-party validation so advisers have confidence in claims made by fund managers.”

RIAA also certified financial advisers and advice practices in recognition of them meeting the required standards for responsible investing products and services. 

“We are seeing rising interest in the program as more advisers are asked about ESG by their clients. We first saw it in private wealth and high-net-wealth offices who have a strong inclination towards it, but now it is becoming more mainstream,” O’Connor said.

To meet RIAA’s certification, licensed advisers must: 

• Be licensed – Maintain authority to provide financial advice in their jurisdiction;
• Have professional membership – Maintain current membership with a professional body;
• Be experienced – Have completed an approved training course or have at least two years’ relevant experience providing responsible investment advice;
• Be educated – Meet the minimum ongoing education requirements by demonstrating how they stay up to date with developments in responsible investment through continuing education;
• Promote responsible investment services – Undertake to enquire about the environmental, social and governance preferences of ALL of their clients, as a minimum including appropriate questioning, and be able to perform an adequate client interview process; and
• Provide responsible investment products – Can demonstrate that they can research and offer responsible investment products, having RI products on their approved products list (or equivalent).

For adviser groups, they must:

• Be legal – hold a current Australian Financial Services Licence;
• Be trained and/or experienced – have at least 50 per cent of their advisers certified as responsible investment financial advisers under the program. To be certified, advisers must have completed the RI Essentials course offered by the PRI Academy OR have at least two years’ relevant experience providing responsible investment advice;
• Support their network – financial advisory groups are committed to and enable the provision of specialist responsible investment training to their adviser network;
• Provide responsible investment products – include responsible investment products on their approved product list (or equivalent) including some that have been certified by RIAA;
• Promote responsible investment services – include appropriate questions on responsible investing in their Financial Advisory Group Fact Find (or equivalent) that is used by all their advisers to all clients; and
• Promote the program – incorporate the certification symbol into their marketing and communications materials in accordance with the Certification Symbol Licensee Agreement and the Licensee Marketing Kit and Style Guide.