Netwealth identifies major opportunity for financial advisers

Platform provider Netwealth has released a report showing significant demand among Australians for guidance on responsible investing.

Seven in 10 (71%) Australians said their understanding of responsible investing was average or non-existent, presenting a major opportunity for financial advisers, according to the Netwealth Investing for Good white paper.

It also found that with education, financial advisers were likely to find a relatively receptive audience, as 66% of investors would ‘definitely’ or ‘possibly consider’ investing in responsible investments for numerous reasons.

“Understanding an individual’s preferences and what drives them to invest responsibly will position advisers well to help educate them on the appropriate investments,” the report noted.

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It identified two main drivers behind responsible investing behaviour: a desire for a positive impact and financial benefit.

“Not surprisingly, the main driver for many is the impact the investment will have to the environment or society. One-quarter would definitely consider investing responsibly if the investment made a quantifiable difference to the environment (23%) or to society (22%),” the report noted.

The majority of Australians (59%) believed responsible investing can lead to returns that are as good as other investments, with a further 21% perceiving them to lead to better returns.

Further, one-third (35%) would definitely consider investing responsibly if they could be convinced that the returns were better than other investments, 21% would definitely consider them if they didn’t have to sacrifice returns.

“The real challenge for advisers, and the industry as a whole, is to clearly demonstrate and quantify the positive impact and the financial benefits,” the report said.

Netwealth managing director, Matt Heine, said it was now easier than ever to invest with a clear social purpose and not suffer a performance penalty.

“Investing with the aim of doing good is no longer seen as delivering poorer long-term investment results,” he said. “Approaches to investment selection and portfolio construction are evolving to accommodate a growing demand for responsible investing.

“There is a growing body of evidence that responsible investing can lead to better long-term investment results, because it is an approach to allocating capital which tends to seek out and favour companies that have more sustainable business models, practices and products or services.”