In the last article I wrote about responsible investing the basic point I made was that effective fact finding and segmentation are intrinsically linked and form the foundation of the responsible investing element of your investment proposition. Obviously, since I wrote that, the FCA’s view on adopting MiFID II in the area and it becoming a mandatory fact find has changed. Ultimately though, I don’t think that really changes the fact that advisers need to embrace responsible investing. It’s become firmly part of mainstream investing and will eventually be the ‘new normal’. Advisers dealing effectively with client needs in this space will be the winners.
To build out your investment proposition it feels sensible to follow the same approach you will have taken to meeting your PROD obligations around researching, selecting and documenting. It’s also worth bearing in mind that as part of the legislation, advisers could be obliged to publish how they factor sustainability risks into their product research process. Having this documented is doubly important so that it can be shared with clients before you engage with them.
With the key segments identified, what does this mean in terms of actual investment solutions? As with any type of investment, the first decision to make is, do you manage it yourself or outsource to someone else to do it for you?
For those already outsourcing their investment proposition, there seems little reason to bring the responsible investing element back into the business. But, for those who manage investment in-house, it may not necessarily be such a linear decision. From a number of advisers I’ve spoken to who manage their own investments, there’s been an interest in outsourcing this part due to its specialist nature, particularly those who use ETFs which can be a little more challenging in this world.