Values driving responsible investing among older Australians

Responsible investing has emerged as a dominant theme for both advisers and clients, but the act of setting up ethical or impact investment portfolios has traditionally been associated with younger generations.

However, two advisers contend that an observable trend is appearing with more retirees and pre-retirees altering their positions to pursue responsible investment.

Adam Drinkwater, senior adviser and partner at Treysta Wealth, noted that unlike younger individuals who often come across responsible investing through diverse channels like social media, older clients primarily acquire this knowledge through meaningful discussions centred on their values.

“When these conversations are actually coming up, they’re coming up more as a result of ‘values’ conversations that you’re having with them,” he told ifa.

“When we talk to our clients, one of the things that we do in a really detailed manner is spend time talking with them about their values and how they would like their financial decisions to align with their life, and what is important to them. This is before we’ve even gotten to the stage of, ‘How are you investing?’”

Mr Drinkwater explained that his clients who have lived in areas greatly affected by bushfires or destructive flooding events experienced a shift in their perspective.

“This promotes conversation around what’s being done, and what the greater cause around this is.

“That’s just one example of how these things start, but I generally see conversations in that area developing more and more.”

He also pointed out that with more mature Australians, language and awareness of financial jargon is another element to consider.

“This cohort of clients, they are probably not going to say to me, ‘Can I use ESG investments?’ because they won’t be familiar with it. What they will probably say is, ‘Can I use my funds to impact what we’ve talked about … in a way that will make the right kind of change or have the right kind of influence?’”

Investing for a sustainable future

Kathryn Fitch-Daniels, financial adviser at Ethinvest, told ifa that she has observed an increase in new clients hoping to set up an ethical portfolio, in addition to existing clients looking to alter their current investments.

“While we still continue to onboard new retiree clients who want an ethically screened portfolio, formerly ‘unconstrained’ clients are choosing to replace existing portfolio holdings with ethically screened options,” Ms Fitch-Daniels said.

She added that older Australians are also increasingly conscious of the legacy they leave behind.

“I think the motivation has always been there, but from my experiences where there has been no transparency or involvement with the kids during the client’s life, the children will just see the portfolio as an asset ready to be redeemed in the estate.

“If a portfolio has ethical values embedded, and this is conveyed to their kids, they are much more likely to continue with the portfolio if this also aligns with their values. It may also prevent wasteful spending of the inheritance.”

As such, Ms Fitch-Daniels encouraged clients to involve their children or grandchildren in these portfolios, particularly when they anticipate they will be inherited down the track.

Meanwhile, Mr Drinkwater said that he has seen an increasing number of older Australians discussing long-term investment risks and their desire to support future generations.

“They’re trying to see into a future that they may not be around for, and they may not know enough about right now ... future risks are definitely now more front of mind,” he noted

“So quite often, one of the conversations we have is, ‘What are the risks in the companies and the areas I’m investing in, in 10, 15, 20 years?’

“So that legacy piece definitely comes up. It’s not necessarily trying to predict what your kids want, or what your grandkids want – it’s about the fact that you want to help them one way or another in the future,” Mr Drinkwater concluded.