How to deliver quality responsible investment advice

Advisers need to expand their understanding of responsible investing in response to Australia’s increasing demand, according to an RI specialist.

Ahead of her workshop at the Responsible Investment Association Australasia (RIAA) Conference in May, founder of Ethical Invest Group and co-founder and head of research at Altiorem, Alexandra Brown, spoke to Money Management’s sister brand ifa about responsible investing, sharing her views on its value as a client offering and some tips on how to approach the conversation.

Calling on findings from RIAA’s recent report, From Values to Riches 2024, Brown highlighted the importance of advisers improving their knowledge of responsible investing.

“Responsible and sustainable investing is evolving rapidly, and clients are wanting this from advisers more than ever. Eighty-eight per cent of Australians expect their super or other investments to be invested responsibly and ethically (up from 83 per cent in 2022),” she said.

“In fact, 65 per cent would invest more if their investments made a positive impact in the world (up from 61 per cent). Our Responsible Investing 101 session is a great way for advisers to get what it’s all about and see how it fits with their client value proposition.

“For advisers, the key takeaway of our workshop is understanding the RI market and how to navigate the plethora of investment products to get the best outcomes for clients.”

The report also showed that more than half of Australians expect their financial advisers to be knowledgeable about responsible investment options (52 per cent), with those looking to invest in the next 12 months being more likely to have such expectations (57 per cent).

According to Brown, there are three key areas advisers need to familiarise themselves with to be able to deliver quality responsible advice that will be covered in her upcoming workshop.

“One, is a solid understanding of environmental, social and governance (ESG) and ethical issues to enable connected and confident discussions with clients,” she said.

“Two, knowing the investment market with the skills to evaluate aligned products and provide the best solution for clients.

“Three, is implementation; bringing these two areas into existing advice processes and fact finds.”

Referencing the RIAA report, Brown said clients tend to be most concerned with ESG issues relating to animal welfare, health care and renewables, among others.

“Climate change, animal welfare, and human rights are big areas and excellent starting points for advisers to get across first up. The top ones in the report include avoiding animal cruelty and gambling, and supporting renewables, health care and water management,” she said.

“The advisers I’ve spoken to who are providing ethical and sustainable investment advice have also mentioned plastics, biodiversity, and Indigenous rights as key concerns among clients.”

In regard to approaching the conversation with a client, Brown recommended discussing the topic at a more general level, gauging their response, and moving forward accordingly.

“I suggest starting with some open-ended questions to get a feel for how interested the client is. For example, ‘Can you share what sustainability means to you personally? Are there specific environmental, social, or ethical issues that you feel particularly passionate about?’” she said.

“Then delve deeper to uncover any examples of concerns or goals the client has in each area. I like to steer the conversation towards uncovering specific areas the client wants to avoid or support.

“Asking clients about their ethical and sustainability preferences is a brilliant opportunity for an adviser to connect more deeply with their clients, and nurture stronger relationships.”

Alexandra Brown will be presenting a Responsible Investment 101 workshop at the RIAA Conference, which will held on 1-2 May 2024.