When we help clients plan for the future we generally suggest that they do something. This might be to save money, invest it more wisely, or use tax breaks. The intention is to get to ‘somewhere’ which might be retirement or leaving a legacy.
As a Paraplanner, I am interested in how we get there. This journey is the reason that we have risk tolerance questionnaires and capacity for loss assessments. It’s the reason that we seek to understand a client’s tax position and ethical investment preferences. Yes, I think that we should exercise intentionality in the journey.
We all know about risk tolerance and capacity for loss. We deal with them every day. However do we think about a client’s ethical investment preference.
At a webinar I recently co-hosted, Gavin Francis of Worthstone (https://www.worthstone.co.uk) highlighted that every investment has an impact – no investment is just ‘neutral’.
Even taking a passive investment approach, you are actively choosing to invest in that way and in that fund/strategy. If we don’t understand our clients feelings about ethical investments we may ‘intentionally’ be investing them in a way that conflicts with their views.
Traditional ‘ethical investing’ often follows the model of ‘see no evil, hear no evil, do no evil’. This is a bit of a fudge in my opinion. If I am concerned about where my money is invested – and intentionally act on this – surely I would think positively about where to put it and not just avoid the obvious areas? This is where I think Impact Investment satisfies a stated desire to invest ‘ethically’ a lot better.
According to the Global Impact Investing Network, Impact Investments are investments made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return.
When we invest money for clients we intend to achieve financial returns – positive ones hopefully. We also need to be able to help them invest intentionally in line with their ethical views. It’s not ‘ok’ to persuade someone to ignore their ethical views because we are not equipped to help. It’s not ‘ok’ to just invest in a fund because it says ‘ethical’ in the name. You need to ensure that the intentions of the fund manager meet the intentions of your client.
If you want to learn more about this intentional approach to investing check out this event that my company EQ Investors is running for Financial Planners and Paraplanners on 11 October as a part of Good Money Week: https://www.eventbrite.co.uk/e/future-clients-will-demand-impact-are-you-ready-tickets-35695407926
Dan Atkinson FPFS APP ACSI, Head of Technical, Chartered Financial Planner, at EQ Investors