The coronavirus pandemic sparked an increase in conversation around environmental, social and governance (ESG) investing, even so that international advice markets are suffering from a lack of investment funds.
Richard Burden, head of international sales at Canaccord Genuity Wealth Management, said to International Adviser: “ESG is one of the main talking points in conversations with IFAs at the moment – they are now looking for solutions.
“It is on the agenda with most clients and it’s not necessarily the kind of ESG investor you would expect – a millennial who is into eating avocados and riding fixie wheel bikes – it is the family patriarch who is looking to invest for the future.
“ESG is now definitively mainstream. The problem is that, internationally, there are not a great deal of ESG funds accessible to the international advisory market.
“I think there is broadly a supply and demand issue. I think among the UK expat advisers, the traditional IFAs in the Middle East and the outlying areas, there is a requirement for access to funds in that area.
“We hope to address that in the future.”
This comes after IA spoke to Colin Dyer, head of proposition and private client management at 1825, who said in January that client demand for ESG “will accelerate exponentially over the next few years”.
ESG discussion
The UK has had a slow build up with the ESG conversation until the pandemic, but how long have clients in the Middle East been looking at the investment strategy?
Burden said: “People are a lot more aware of their impact on the world. During the pandemic, people have had the time to take stock of what was going on.
“I don’t think it’s a coincidence that covid-19 brought ESG to the fore. In the past, people have laboured under the misconception that you have to give up potential performance if you are to invest in ESG, but that myth has been totally debunked, particularly over the last six months.
“ESG is not just a ‘tick in the box’, a standalone proposition or theme anymore. In companies like ours, we are starting to incorporate ESG themes into the wider portfolio. Mainstream fund managers have been looking at ESG for some time.
“IFAs and wealth managers – always keen to look out for the next unicorn and exciting things to talk about with clients – are having daily conversations with clients about ESG. This all clearly shows we have moved beyond the tipping point – ESG has become part of the mainstream and will continue to be so.”
Outsourcing
Burden also spoke about some of big topics facing the Middle East advice sector and said that outsourced investments is a big discussion for advisers.
“I think the days of selecting funds during that five minutes they’ve got spare on a Friday morning to rebalance their clients’ portfolios are gone,” he said.
“We’re seeing a lot more vertical integration of IFAs and fund houses. And actually, IFAs just putting their hands up and saying, ‘we can no longer run our own model portfolios, we need to go out there and find the best in that sector’, and then sell that service as an IFA to the client.
“That’s what we are seeing all the time. All the major players in the market have outsourced partners. It allows them to concentrate on looking after clients.
“I think putting a buffer between IFA, wealth manager or broker and the client in terms of putting an investment house there in the middle is very sensible, and we are seeing a great uptake in that. And also, at the end of the day, it allows the broker and the client to sack the investment house if they haven’t performed. We’re seeing outsourcing really come on at pace.”
