Wealth managers ‘fail to discuss ESG’ with retail investors, Oxford Risk study finds

  • Nearly half have never been asked by advisors how well their investments live up to their principles
  • But nearly one in three would invest more if their portfolio reflected their ESG views

Regular retail investors are disappointed in responsible investing and ESG by wealth management advisors who don’t discuss their views on investing for good, according to new research from behavioral finance experts d ‘Oxford Risk.

The Oxford Risk study found that 46% of adults with investment portfolios managed by wealth managers have never been contacted by them about their attitude towards ESG and responsible investing, and less than two in five (37%) say their portfolio reflects their views on sustainable investing. .

This is costly for wealth advisors and their clients – nearly one in three (31%) say they would invest more if their portfolio better reflected their views on ESG and responsible investing.

This particularly applies to young investors – around six in 10 (59%) of under 35s with investments say they would invest more if their money was directed more towards responsible investing. Around 32% of all investors say their advisor does not meet their ESG investing needs.

Oxford Risk’s ESG Suitability Framework helps wealth managers comply with European MiFID regulations, by accurately and comprehensively assessing the levels of E, S and G attention an investor should have in their portfolio and how far should the impact spectrum be selected, which is akin to high-level asset allocation. It also examines the selection of instruments to meet asset allocation and examines ongoing investor management and personalized behavioral messaging to use based on Oxford Risk’s robust behavioral finance methodology.

Greg B Davies, PhD, Head of Behavioral Finance, Oxford Risk, said: “Addressing investors’ sustainability preferences requires a deeper understanding of both financial personality and that fit – matching investors with the investments that are right for them – is at the heart of helping people to use their wealth wisely.

“It is surprising that nearly half of investors say they have never been contacted by their advisers about their attitude towards responsible investing and ESG, and less than two in five say that their investment portfolio does not represent their view of responsible investing.

“Advisors could miss out as a significant number of investors would consider investing more if their money was focused on ESG and responsible investing, which we can help support as part of their investment process. adequacy of advice.”

Oxford Risk’s ESG Suitability Framework solicits each investor’s unique ESG preferences to determine how much ESG each investor should be encouraged to have in their portfolio, and how the portfolio should be constructed to meet their personal preferences. each investor to balance “E”, “S” and “G.”

His research shows that most investors want emotional comfort that ESG investments do what they claim to do and seek out independent parties they can trust to verify those claims. Wealth management advisors are responsible for tailoring ESG solutions to suit individual preferences. However, properly constructed ESG profiling provides a double bonus to wealth managers by quadrupling the amount invested by investors in ESG investments and making investors with high ESG preferences much more likely to invest overall.

Oxford Risk’s behavioral tools assess the personality and financial preferences as well as changes in investors’ financial circumstances and, complemented by other behavioral and demographic information, build a comprehensive profile. Oxford Risk’s financial personality tests can measure up to 20 separate dimensions, six of which reflect ESG investing preferences.

He believes that the best investment solution for every investor must be anchored on stable and accurate measures of risk tolerance. Behavioral profiling then offers investors the opportunity to learn about their own attitudes, emotions and biases, helping them prepare for the anxiety that may arise. This should be used to help investors control their emotions, not to set the appropriate risk of the portfolio itself.

Dolores W. Simon