Leah Willis

Financial advisers who actively encourage clients’ children to be involved in the wealth-transfer process had higher retention rates and reported increases in client satisfaction, according to a new whitepaper published by Australian Ethical yesterday. 

The report found 61% advisers have clients who have already transferred wealth to their children or are in the process, with many wanting to begin the process while they’re still alive.  

Of those that initiated a wealth transfer conversation, advisers who incorporated responsible investing into their offering reported higher client satisfaction (73%) than those that didn’t (62%).

Australian Ethical’s 2023 Opportunity Next report, supported by new research from CoreData, examines the important role financial advisers will play in shaping the intergenerational wealth transfer and meeting the needs and expectations of the next generation of prospective clients.   

Almost half of advisers say they are already incorporating responsible investing into their advice value proposition.  

Australian Ethical Head of Client Relationships, Leah Willis, said it is clear advisers need to take a proactive approach to engaging with the next generation, and understand their investment values and drivers.  
 
“There’s an advantage for financial advisers in engaging early on with beneficiaries, and to help facilitate the intergenerational wealth transfer. We’re already seeing that advisers who incorporate responsible investing into their offerings report higher client satisfaction,” said Ms Willis.  

“Responsible investment principles are going to be part of conversations going forward, and being able to understand younger generations values and drivers is going to become increasingly important in attracting younger clients.”  

Almost half (47%) of advisers, who are already engaging with clients, plan to address the intergenerational wealth transfer opportunity by facilitating family conversations.

More than half of advisers agreed that advice practices that demonstrate a strong understanding of responsible investing will be able to attract younger clients.  

It’s anticipated that $3.5 trillion dollars will be transferred from Baby Boomers to their children and beneficiaries over the next two decades.^[1]   

Nearly half of the wealth transferred to children and beneficiaries is consumed almost immediately – going towards personal debt, mortgages, and luxury or self-care items to support their current lifestyles. The remaining half has the potential to be reinvested. 

“Advisers are going to be increasingly called on to meet the needs of their clients’ children and beneficiaries, who may have different values or greater focus on responsible investing than their parents did. It’s critical that advisers can have these conversations.” 

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[1] Productivity Commission 2021, Wealth transfers and their economic effects, Research paper, Canberra; pc.gov.au/research/completed/wealth-transfers

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Leah Willis

Responsible investors who use financial advisors are significantly better-informed about investment performance, fees, and the sustainable impact of products than those who try to look for responsible or ESG options themselves, according to a new report published today by Investment Trends.

Demand for advice about responsible investing is expected to grow with the next wave of investors, with 29% saying they don’t understand responsible investment methodology, and around 27% wanting to seek financial advice before investing.

In 2023, demand for ESG investments remained steady, with 82% of responsible investment advisers recommending responsible investment products to clients in the last 12 months. 

Both investors and advisers called for standardised terminology, better measurement and clearer comparisons to combat greenwashing, with almost half of advisers surveyed saying greenwashing was increasingly challenging their ability to recommend responsible investments.

Advisers surveyed were found to favour ‘actively managed funds’ that met ESG principles, with Australian Ethical the most recommended provider. The most common method that advisers use to assess the ESG credentials of an investment product is through ratings’ house Morningstar, followed by Lonsec.

The 2023 Responsible Investing Report illuminated the role advisers play in helping Australians to invest in line with their personal values, steer investors towards sustainable investments, and demystify ESG principles and products.

Australian Ethical Head of Client Relationships Leah Willis said these findings reinforce the crucial role financial advisers play in guiding Australians to invest in line with their values: “As the responsible investment industry matures, it’s clear investors will need to rely on the ability and guidance of a professional adviser to help them navigate investing in line with their values.

“It’s promising to see the effect responsible investment focused advisers have already had on the cohort of Australian’s looking for responsible investment options. But it’s clear advisers need to remain at the top their game to keep up with growing demand from client’s.

“Equally fund managers who don’t transition will be left behind as the long-term value of non-ethical assets shrinks, our ethical approach has meant we’re well ahead of that curve.”

Almost 70% of advisers felt it was important to broach ESG investing with their clients to fulfill their best-interest duty. A further 80% of advisers agreed it is their responsibility to ensure their client’s investments align with personal values and principles. 

The report found highly driven responsible investors who primarily considered ESG principles when investing had on average almost $1 million invested outside of super, indicating strong demand for responsible investing among high-net-worth investors.

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Leah Willis

Australian Ethical Investment Limited (Australia Ethical) has announced that its Balanced Fund has received a ‘Superior’ four-star rating by SQM Research, meaning it is suitable for inclusion on most Approved Product Lists (APLs).

In awarding Australian Ethical’s Balanced Fund a four-star ‘Superior’ rating, the SQM Research Report highlighted the strength of its investment team and the SAA and portfolio construction processes. It also noted the Balanced Fund’s superior outcomes versus peers since inception in terms of information ratio, Sharpe ratio, and volatility.

Australian Ethical Head of Client Relationships Leah Willis says SQM Research noted Australian Ethical Investment is established as one of Australia’s eminent ethical investment houses with a 35-year history.

“We were particularly pleased with SQM Research’s recognition of the strengths of our investment team, and their commitment to investing in sustainable companies across sectors that are growing and future focused,” Ms Willis said.

“The recognition that ethical investing is inbuilt into our culture, rather than being an ‘add on’ is an important distinction. Our total portfolio solution leverages our ethical leadership and 30-year track record, and this is also something that makes us stand out from our competitors.”

“We know that clients want to invest in line with their values. The Fund provides advisers with an easy off the shelf solution to respond to client demand and align their investments with their values.”

“We’re proud of the rigour and research that goes into our decision-making. This ensures we only invest in companies that have social and environmental purpose as part of their competitive strategy. These companies will thrive in a low-carbon, equitable future,” Ms Willis said.

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Leah Willis

In response to growing investor and adviser demand, Praemium has significantly enhanced its approach to Environmental, Social and Governance (ESG) with new ESG screening and customisation platform functionality and the addition of the Australian Ethical Australian Shares Portfolio to the Praemium SMA.

In a platform industry first, Praemium has partnered with leading ESG research house Sustainalytics, to integrate their ESG research and analysis into the platform allowing advisers to tailor portfolios to their clients’ specific ethics and values through bulk stock exclusion.

Managed accounts have always allowed advisers to place holding exclusions on the platform and many have utilised it for ESG purposes. This single stock blocking approach can be time consuming and require ongoing research and updating of preferences to deal with changes at the stock level.

Advisers using Praemium’ integrated Managed Accounts Platform will be able to automatically screen their clients’ portfolios against nine key screening criteria, including three fossil fuel screens, alcohol, tobacco, gambling, adult entertainment, animal testing and controversial weapons, providing a scalable way to satisfy their clients’ ESG preferences and ensure ongoing monitoring.

Praemium has also added the Australian Ethical Australian Shares Portfolio to the Praemium SMA. This is the first time this portfolio has been accessible via a Separately Managed Account and offers the opportunity to invest in an actively managed, diversified Australian share portfolio of companies selected for their social, environmental and financial credentials. The portfolio is centred around the 23 principles of the Australian Ethical Charter that guides its investments in companies that have a positive impact on the planet, people and animals and avoids companies that engage in harmful products or practices. The new offering adds to the growing list of ethical investment options Praemium offers.

Australian Ethical’s Leah Willis commented “Australian Ethical is already well known for our ethical leadership and we’re excited to make this available to advisers in an SMA together with Praemium.

“With Australian’s increasingly wanting to know where their money is invested, our partnership with Praemium offers a fully transparent portfolio underpinned by more than 30 years of ethical investing experience.”

Praemium’s Head of Investment Managers & Governance Damian Cilmi commented “The growing interest in ethical investing is only likely to increase as investors look for ways to minimise their environmental footprint. This offers a real engagement opportunity for informed and well-prepared advisers to provide advice and support to help investors align their investment goals with their personal ethics. Praemium’s new enhancements provide advisers with a variety of options to meet the ethical considerations of their clients whether that is building bespoke custom portfolios, utilising an SMA with customised screening services or investing in specialised ESG strategies. “

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Leah Willis

Limited transparency and disclosure from the $2.6 trillion^[1] super industry is impacting advisers’ ability to provide advice on ethical and environmental, social, and governance (ESG) considerations, according to leading ethical wealth manager Australian Ethical Investment.

Leah Willis, Head of Client Relationships at Australian Ethical, said that while nine in 10 Australians expect their superannuation or other investments to be invested responsibly and ethically^[2] both advisers and consumers are struggling to obtain a complete picture of many funds’ holdings.

“Our experience suggests that Australians want more alignment between their investments and their values but a lack of transparency makes it difficult for advisers to point them in the right direction.

“The current lack of disclosure by super funds is preventing Australians from knowing exactly where they are invested and what activities they are funding through their superannuation and other investments,” she said.

Australian Ethical has launched a public awareness campaign that aims to highlight these issues to help Australians consider the social and environmental impact of their investments as well as economic performance.

Willis said: “Ethical and responsible investing presents advisers with a great opportunity to form deeper, more meaningful relationships with their clients by matching them with investments that align with their personal values.

“And while a growing number of Australians are actively seeking Australian Ethical out as having the highest ethical conviction of any responsible fund, challenges in the sector include limited knowledge, confusion, and a lack of advice.

“The many “shades of green” can be bewildering for investors, and it is the adviser’s role to demystify and simplify the ethical investing journey so their clients can make informed and empowered decisions.”

According to the Responsible Investment Association of Australasia, ethical investing quadrupled in Australia between 2014 and 2017^[3] with Australian Ethical named the fastest growing super fund in Australia by membership for the past five years^[4] . This growth spans all ages as ethical investing continues to become mainstream and not just “millennials” and “activists” seeking values-aligned investments.

“For advisers to attract and retain clients and appeal to future investors it is critical they realise ethical investing is not a fad. It is here to stay,” Willis said.

Adviser education Australian Ethical has been helping people invest in a better future for over 30 years and recently renewed its focus on adviser education, updating content and producing a toolkit to help advisers navigate the sector with confidence.

Willis said: “Our experience speaking with Australia’s adviser community indicates that demand for ethical and responsible investing is client-led rather than advice-driven which is why adviser education is so important. Advisers need to be able to respond to clients’ queries about the impact of their investments accurately.”

One of the simplest ways advisers can gain transparency over investments and ensure due diligence is by asking the funds directly about their investment process.

Willis said these questions should include:

• What is the fund’s philosophy on responsible investing?
• What sectors/companies does the fund invest in and where won’t it invest?
• What’s the impact of these investments, for example, on the environment and on society?
• How is the fund investing member money to make a positive difference?

A recent survey by Investment Trends highlighted strong appetite for ESG investments among high net worth investors, with 70% believing it is important for their portfolio to incorporate responsible investing principles, while 36% say they currently exclude or include investments based on ESG concerns^[5] .

“As we see the interest in responsible and ethical investment continue to grow, access to comprehensive investment information, philosophies, and screens should be readily available for the adviser community to help clients realise their financial goals,” Willis said.

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1. Royal Commission Final Report, Volume 1 February 2019
2. The Responsible Investment Association of Australasia November 2017
3. The Responsible Investment Association of Australasia June 2018
4. KPMG Super Insights Report 2018

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