Article by Phil
As we know from the latest October news figures from the Investment Association showed a record £500 million in withdrawals from ESG investment funds.
That’s funds which meet Environmental, Sustainable and Governance benchmarks. Although the benchmarks are not formally set in stone anywhere and vary from country to country and fund to fund, which is one of the problems.
This is backed up by the latest survey published in Financial Planning Today (9/10/23) which showed that:
- 63% of people weren’t convinced by the ESG credentials of investment providers. This is the highest level of scepticism for many years.
- 53% of investors however do still consider ESG factors when making their decisions. But again, this is down from 60% in 2021.
- Of the 47% who don’t consider ESG when making a decision their main priority is performance.
However, we should remember that the overall value of UK ESG investment funds is still a massive £95 billion. Which is a 7% of overall investment funds.
In 2022 over £5 billion was invested in sustainable funds. Although this was down from £15 billion the year before. The value of overall investments in the UK is almost £9 trillion.
A new partnership between Fundament and the Global Returns Partnership has now created a first of its kind charitable platform which allows investors to donate to climate projects through their ESG investment funds. The climate charities are selected by Global Return Partnership and updated every six months. Clients can choose how much they want to donate.
Let’s hope this doesn’t create issues for firms in the future if the charities don’t perform as they were supposed to.
For example, the FCA received just over 250 complaints about advice firms in the last quarter to the end of June, through their whistleblower scheme. Roughly 100 complaints a month.
The complaints were varied and included complaints about financial advisor compliance with rules, the fair treatment of customers, company culture, fitness and propriety of actions, fraud and then other technical matters like systems and controls and data security.
This is a small number, compared to say the BBC which receives somewhere between 12,000 and 20,000 complaints per month. But some advisers are worried that numbers may increase with the advent of Artificial Intelligence (AI).
It seems that some firms have trialled the use of AI to write client reports. This involves disclosing sensitive client information to the AI system which has caused concern.
There are also concerns in the wider financial services about the transparency of charging structures since the advent in July of the Consumer Duty. It seems this has caused market leader St James Place (SJP) to overhaul it structures, which is recently announced (Money Marketing 17/10/23).
It seems that they will drop their exit charges which used to apply to customers moving their pensions and bonds away from SJP. They will also become more transparent with their charges, moving from an overall charge to a breakdown of the separate advice, fund and product charges. The charges will also be re-balanced meaning that clients with bigger portfolios will pay lower percentage charges.
However, the changes won’t come into effect until at least 2025 and will only apply to new clients.
