Responsible investing practices doubled in importance for finanical advisers through 2021 according to researcher Investment Trends, which calls it the fastest growing priority area for advisers right now.
While diversification (68 per cent), capital growth (37 per cent), and liquidity (31 per cent) were rated as the most important priorities for advisers through the year, responsible investing was the fastest moving area of importance at 27 per cent according to the group’s 2021 Adviser product and marketing needs report.
In the last year over 40 per cent of clients have requested to trade investments based on environmental issues, the researchs reveals, up from 24 per cent in 2020. To cater to the growing need, product providers will need to increase their collective spend on research in ESG areas according to Kurt Mayell, Investment Trends’ associate research director.
“Advisers who are prioritising ESG investments expect to use a wider range of products or increase their use of active management,” Mayell says. “To enable the growth of ESG investing, advisers believe that product providers should put as much effort into research and data analytics as they do on new product issuance.”
The researcher also notes a need for more education about recent compliance requirements linked to the Design and Distribution obligations, with many advisers indicating they wanted assistance on ‘Target Market Determination’ related issues and implementation guidance.
“2021 was particularly prolific in terms of additional regulatory compliance burdens,” Mayell says. “In relation to DDO, there are significant opportunities for education, starting with the jargon itself. Close to four in fiev advisers rate their understanding of ‘significant dealings’ as average or below.”