Dynamic Planner is to unveil a psychometric sustainable investing questionnaire.
The tool, which the company described as an “industry first”, will be available to all advice firms and clients on the platform from 7 May 2021.
“The questionnaire provides a simple, yet academically robust solution to the challenges advisers face when talking to their clients about environmental, social and governance (ESG) factors and sustainability,” Dynamic Planner said.
It was developed by the firm’s head of psychology and behavioural insights, Louis Williams, and was informed by focus groups and tested by 1,000 investors.
Dynamic Planner’s questionnaire measures:
- Psychological distance; people are more likely to take greater risk if the impact they will experience is far in the future;
- Personal values; whether clients want to maximise their wealth, promote social change, or find consistency with their personal beliefs, they may be willing to accept lower returns as a compromise;
- Emotional benefit; sustainable and responsible investing can have emotional benefits as investors may feel compensated even if the risk/rewards they receive are not what they expect;
- Positive impact; many investors want to make sure their money is being used for good, beyond the monitoring or managing of ESG risks, and they may be willing to accept lower returns to achieve their goals; and,
- Financial considerations; advisers need to be able to understand client priorities in terms of financial returns and/or sustainability preferences.
Understanding the ‘whole picture’
Williams said: “Sustainable investing is not a straightforward tick box exercise. Preferences can be complex, encompassing an incredibly broad range of factors. Expectations of the impact it can have can be misjudged, along with the importance and balance clients place on potential returns and their sustainability preferences.
“The key to fully understanding the ESG and sustainability hopes and expectations of a client is real engagement, so that their preferences can be accurately captured and the implications of their choices discussed.
“Until now, emphasis has been placed on understanding the impact companies have concerning ESG but few advances have been made to create a process which truly helps clients to understand the whole picture.
“Bringing together psychology and statistics in the form of our Sustainable Investing questionnaire enables us to help advisers cut through the noise and really understand how someone might feel and act both in the short and long-term. Successful investment and sustainability conversations pivot on a clear understanding of someone’s goals.”
Ben Goss, chief executive of Dynamic Planner, added: “Our psychometric Sustainable Investing questionnaire is an industry first, built on a combination of the robust academic thinking of schools of psychology and statistics. And importantly, in tandem with investors and advisers.
“Our team has the experience of successfully creating a risk profiling questionnaire that has supported more than one million clients of advice firms since 2013. What we are launching now is built on a similar formula, to capture a client’s sustainable investing preferences – an extension of our suitability process with the extra ‘S’ of sustainability.
“Combined with our Sustainable Investing insight launched earlier this year, we will be able to help advice firms deliver more deeply valuable and bespoke financial plans in line with clients ESG preferences.”
