Advisers called to refer ethical investors to ‘specialist’ peers

Speaking during an ESG roundtable discussion hosted by ifa's sister brand, InvestorDaily, Jonathan Shead — head of investments, Australia at State Street Global Advisors — said professionals must not neglect their broader obligations to clients when shaping advice for ethical investors.

He said some initial interpretations of FASEA’s Financial Planners and Advisers Code of Ethics (2019), risked falling short of advancing an ethical investor’s best interests.

“As a financial adviser, the fact that a client comes to you with an ethical question does not absolve you of your obligation to give them balanced advice — to consider risks, to consider costs and all those sorts of things,” he said.

“So, there's an obligation for the advice to still be robust financial advice regardless of what ethical framework a client comes to you with.”

According to Nathan Fradley — co-founder of Ethical Advice Conference and senior adviser at Tribeca Financial — advisers should consider referring ethical investors to peers specialising in the space.

Fradley, who also featured on InvestorDaily’s roundtable, said referrals would help ensure compliance with standards six, nine, and 10 of the FASEA code.

“If it is the situation where [the client has] a specialist need, refer out,” he said.

“…There's only 15,000 of us in Australia. You can share people to [advisers] who will do the best possible job for that client.”

This comes amid a rise in demand for ethical advice services, including ESG investment.

VanEck’s latest annual Smart Beta Survey — which comprised 620 financial professionals working in an advisory capacity in Australia — reported that 46 per cent of professionals invested in ESG in 2021.

This reflects a 130 per cent increase in professional ESG investing since FASEA’s Code was launched in 2019.

Client demand has been the key driver of growth — with 70 per cent of advisers either investing or considering an investment in ESG off the back of client interest.

The ESG roundtable will be published shortly on investordaily.com.au

[Related: ESG reporting presents a ‘tremendous’ task for ASX companies ]