ESG-focused clients more likely to switch adviser

As advisers detail a ‘scarcity of sustainability’, EY has found over a third of wealth management clients feel their adviser is letting them down on environmental, social and governance (ESG) issues.

According to a global wealth management report from EY, over three-quarters of Australian respondents had personal sustainability goals. However, 41% felt their wealth manager fell short in understanding these values.

The top three ESG issues identified by clients were climate change and carbon emissions, better worker welfare and human rights and air and water pollution.

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“When it comes to sustainability goals, wealth providers’ understanding is failing to keep up with clients’ beliefs,” the report said.

“True, half of clients believe wealth managers understand their goals but 41% feel their provider could understand these goals better and 5% think firms don’t understand them at all.

“Wealth providers should note that 35% of clients who have sustainability goals are looking to switch wealth managers in the next three years, over twice as many as among clients without sustainability goals.”

Earlier this week, Janus Henderson global head of portfolio, construction and strategy Adam Hetts said advisers struggled with a ‘scarcity of sustainability’ as there was a smaller universe of sustainable investments available to offer clients.

This was echoed by EY who said clients with sustainability goals were twice as likely to be open to using alternative investment which advisers may be inexperienced in using.

“Clients’ fast-evolving expectations raise challenging questions for wealth providers. For example, our research shows that clients with sustainability goals are twice as likely to use alternative investments, forcing providers to offer asset types that they may not have a proven expertise or track record with, creating a potential need for new and innovative partnerships with specialist providers,” it said.

Rita Da Silva, Oceanic wealth and asset management leader at EY, said: “Wealth managers should consider offering end-to-end ESG investing journeys underpinned by a broad choice of ESG investing options. Tailored guidance and advice, flexible educational options, supplemental research on important topics and clear accountability that links to their wider sustainability strategies will be key”.

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