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ESG: Are retail investors being left behind?

by Josh Blundell, Head of Research and Operations

There can be no arguing about the explosion of ESG or responsible investing in the past few years. The emergence of a dedicated publication such as ESG Clarity is testament to that. But the facts are also clear to see too, whether you look at the growth of assets under management or the ever-widening product set.

Indeed, last year was hailed as the year ESG came of age as assets in sustainable related funds reached $1.7tn, according to Morningstar – up 50% on the previous year with Covid-19, perhaps not unfairly, being associated with this growth.

Yet, despite the surge, in-depth research by The Wisdom Council, in partnership with Federated Hermes, Rathbone and St James’s Place, has raised questions whether retail investors are being left behind. Institutional money may be flowing into ESG but are we seeing the same structural change in how portfolios are managed when it comes to retail assets?

Our research questions whether we are. Yes, retail investors are being offered product options to choose from – if they’re so inclined to engage with their long-term savings in a meaningful way and then empowered to select an RI product over an alternative. But the reality suggests that most investors aren’t so inclined. Survey after survey on default pensions are testimony to this.

Investors don’t associate the investment industry with sustainability

Our wide-reaching research programme analysed thousands of conversations on social media, carried out interviews with investors and financial advisers, and surveyed more than 2,000 UK consumers, all of whom either had a workplace or private pension. And we found that around six in 10 retail investors don’t realise they can invest in a way that contributes to challenges such as climate change.

In fact, 52% of UK consumers contributing to a pension don’t even recognise that the financial services industry can make a difference at all – other than aviation, fossil fuels and mining, investment services is the sector seen as least likely to be able to operate sustainably.

This is a worrying failure of connection – it appears that people in the UK simply don’t associate the investment industry with sustainability. While they may think of recycling or upcycling or using less plastic or moving to a green energy supplier when trying to live more sustainably, they rarely think about where their savings sit or where their investments have gone.

Yet savers and investors care about these issues

That isn’t to say investors don’t care – they demonstrably do care. Four in five of those we surveyed believe they have an important role to play in protecting the environment, while three-quarters said we all need to limit our consumption to ensure a sustainable future. And these views are influencing behaviour, both with people taking direct action to limit their own impact by using less plastic, for instance, but also choosing more sustainable companies as part of their purchase decisions such as a green energy provider.

So, where does that leave the trillions of pounds worth of assets managed on behalf of people who aren’t wildly engaged with their savings or investments – the retail advised assets, the default pension funds, the personal pension schemes, the simple stocks and shares ISA solutions from the big banks (arguably still the first port of call for most people when it comes to investments)?

The investment industry is collectively saying that ESG is fundamentally a better way to manage money – which begs the question as to whether all retail assets should be employing ESG integration as a bare minimum.

There are green shoots in our research. It shows that investors who are already investing using responsible funds are much more likely to be advised. This is a positive turnaround given that financial advisers were once seen as barrier to the ESG market.

Consumers now expect all companies to be acting responsibly

The vast majority (81%) of UK consumers now expect every company to be as environmentally responsible as they can be – it can’t just be a product choice, it is increasingly a hygiene expectation, for every sector. And our research shows this clearly applies to pensions and investments as well.

For example, when we explained ESG integration in an accessible way (through a short animation presentation) two-thirds of them said they would want some or all of their pension to invest using this approach. Yet clearly most aren’t going to seek it out for themselves. This evidence shows that the latent, often passive demand for the investment industry to be investing responsibly is significant and widespread – in fact our research suggests it is simply an expectation. Particularly, if we are saying it doesn’t require a sacrifice in terms of either performance, risk or cost.

The investment industry needs to take ownership and lead. It needs to act on behalf of retail investors and ensure they don’t get left behind. And maybe by evidencing that it is part of the solution (not the problem) and does have a vital role to play, then it will start to bridge the gap between a consumer population that is trying to be more sustainable and an industry that is not perceived as part of the solution.

A transparent industry that takes its leadership role seriously would be a good result for everyone.

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Innovation. Collaboration. Inclusion

by Anna Lane, CEO |

Although the year so far is not proving hugely different to 2020, on a personal note I am extremely proud to be kicking off 2021 as President and CEO of Women in Banking and Finance (WIBF). A non-for-profit, volunteer-led network dedicated to increasing women’s visibility, participation and engagement in financial services at all levels – and I know something that many of you will be familiar with.

It feels a truly momentous time for me to be taking over….

As I write, we find ourselves once again in national lockdown and juggling work with a myriad of family, home, health and schooling pressures. Over and above the current challenges, it seems clear that a significant change for us, following the shift in our working patterns and improved technology over the last year, is that many will choose to continue working both remotely and/or flexibly if offered the opportunity.

Although I can count myself a veteran of the 2007-2009 financial crisis, it seems to me that the Covid-19 pandemic has had a far more profound impact on industry and society at large. The impact of Brexit adds a further area of uncertainty. However, in any crisis it is vital to ensure that there is access for all to opportunities and resources. It is this inclusivity that drives innovation and recovery and, in consequence, the business case for gender, disability and ethnic diversity is stronger than ever.

Today, perhaps, there is no more apt a demonstration of innovation than in the development of the Covid-19 vaccines which are a triumph of diverse thinking, collaboration and ingenuity.

It is our flexibility, diversity, cooperation and creativity that will help us to emerge stronger than before from the current economic crisis – the likes of which many of us will not have seen in our lifetime.

I take great inspiration from the concepts of inclusion, innovation and collaboration. It is my intention to incorporate these key themes into my vision and ambition, not only for WIBF but also, with my other hat on, as CEO of The Wisdom Council.

For example, we’ve spent the past two years undertaking extensive behavioural research at TWC in collaboration with several partners, to not only find out why women aren’t engaging with financial services companies, but also change their attitude to long-term saving and investments. As part of that work, we have identified one very specific cohort of women who responded positively to a set of behavioural nudges but that the industry would not ordinarily target, because they never engage and cannot afford to save. And yet I feel, as an industry, we should do more to help people at the margins.

Now more than ever we all have a role to play in society

The savings gap is a huge and growing issue. Pension poverty will be a reality for many more people (both men and women) if we can’t persuade them to start saving. I firmly believe the insights and data from our collaborative research are also valuable for the government, consumer groups, charities and foundations focused on financial wellbeing. It’s something that I am actively investigating and I look forward to discussing this further with our partners and those organisations that share our values – because now more than ever we all need to play a role in society to help.

If this is something you are interested in getting involved in or you have ideas that could support this initiative, then please do get in touch.

“Alone we can do so little; together we can do so much.”

Helen Keller

Wishing you restful weekends. If this is what the first full January “back to work” week is like, I dread to think what the rest will be like. Onwards and upwards!

Warm wishes,

Anna Lane, CEO, The Wisdom Council

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Does investing need a rebrand?

by Anna Lane, CEO |

A glance at the latest HMRC ISA statistics shows that four in five accounts opened are cash ISAs. And everything that I have seen this year would lead me to believe that this ratio, which has been very consistent in each of the past 20 or so years, will not change any year soon – in fact in the latest figures available for 2019 volumes of cash ISAs increased while stock and shares ISAs fell. Unfortunately for many people, investing in a stocks & shares ISA simply conjures up images of The Wolf of Wall Street and given the year we have had, it is perhaps no surprise that stocks and shares ISAs have suffered outflows of £1.12bn over the past 12 months.

Optimists suggest that the strong emergence of ESG and RI investing could be the switch that turns consumers onto investing. After all, there is a groundswell of public opinion for sustainable change, driven by passionate calls from high-profile activists such as Greta Thunberg and Sir David Attenborough, while the pandemic has arguably intensified the climate change debate. Our RI research, the full findings will be published next year, shows that sustainability gets as many online mentions as the Premier League. Yet our research also highlights that while people think about sustainability in their everyday lives, the majority do not associate it with finance – or even think about their finances at all.

Only 8 per cent seek financial advice

There is always an exception to the rule, as with more engaged investors – they account for around 25 per cent of RI investors. And our research reveals that these investors are more likely to invest in ESG mainly because they typically ask for financial advice. But here is the quandary – most people don’t take financial advice. As the FCA’s evaluation impact of the Retail Distribution Review and the Financial Advice Market Review highlighted earlier this month, only 8 per cent of UK adults have ever received financial advice.

Financial services marketeers agree that you have an entirely different conversation with someone who already sees themselves as an investor – they are far more receptive to engaging with communications. Yet our research shows that most people with a pension do not consider themselves as an investor. We need to find ways to understand what makes people tick; we need to be able to talk to consumers on their terms, in their territory, when the time is right for them.

It’s an area that we have been exploring this year using FMCG techniques. During the summer, using our original Yes She Can study, we dug deeper into the research to find out who these women that aren’t saving are so we can provide data that is relevant, tangible and consumable for marketeers. Working with brand data-insight experts we created seven cluster groups of ‘real’ women – based on their lifestyle, needs, buying habits, aspirations and importantly aligned to behavioural intent to engage with the call-to-action content. We have undertaken a similar project with our RI research too – so we can engage with people who will have no clue whether their pension is invested responsibly or not.

One size fits all marketing approach not fit for purpose

Social restrictions and lockdown have meant that digital, more than ever, has come to the fore and the onus has very much been content and communications. The investment industry is competing against a sophisticated group of consumer brands such as Amazon, which are leading the way with highly tailored communications. We at TWC have only stuck our toe in the water mirroring this consumer style of approach but we believe that if you can understand what makes people tick, who influences them and talk in their language, then you can start to move the dial.

A one size fits all approach to marketing is no longer fit for purpose. If people aren’t wealthy, they don’t believe they need financial advice and therefore, they don’t invest. The biggest challenge the investment industry faces is that investing is primarily a B2B brand not a D2C brand. This branding perception needs to change. A stumbling block is not so much helping consumers navigate the financial journey, it is getting them on that journey in the first place. We all need to adapt our approach, so we can truly understand the motivations of consumers, grab their attention and get them on board.

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It’s time to join the culture club or fall out of fashion

by Anna Lane, CEO |

The FCA’s Business Plan 2020/21 slipped out last month almost unnoticed.  With COVID-19 turning even the best-laid plans upside down, it was perhaps no great surprise to hear that the regulator needs more time to reflect on what the current crisis might mean for long-term strategy and the shape of the organisation. When the new CEO is finally appointed, they will certainly have a long to do list for their 100-day plan.

It was telling that, in the limited space available, the FCA hammered home their medium-term priorities, putting both customer outcomes and culture front and centre. It reads like a final wake-up call for any management team holding out against the inevitable tide of change.

The FCA want to see firms embracing business models and strategies that minimise potential harm to customers. They call out four key drivers of culture – purpose, leadership, approach to rewarding and managing people, and governance. Interestingly for an organisation that many customers don’t even know exists, this approach perfectly encapsulates the emerging zeitgeist and reflects our own conversations with investors. While 2019 was the year the world woke up to the climate emergency, 2020 is being increasingly dominated by talk of the need for social reform. A defined purpose and clear cultural values are no longer a nice to have – they will be essential for firms that want to survive (and even thrive) in a post-pandemic world.

In our latest survey of UK retail investors, a significant majority (70%) told us they will consider a company’s behaviour during the pandemic in their future investment decisions. This rises to 81% amongst Millennials. As a member of the Wise Society puts it:

“I think this crisis should serve as a wake-up call, to government, businesses up and down the country and people should look deeply into how they operate as a company.”

This extends not just to the companies sitting inside portfolios, but also to the firms that consumers trust to manage their money. It will come as no surprise that we have tested a few assessment of value reports recently. What has become apparent is that investors don’t just want to read about the outcomes of the assessment, they want to get a sense of what the company stands for. How do you behave as a business? Company attitudes towards their employees, their customers, wider society, and the environment will have a direct impact on future commercial success.

The focus on culture isn’t just a passing fad – companies that fail to sit up and take note will be consigned to the history books.

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Communicating in a crisis – TWC’s top tips

by Dawn Hyams, Head of Investor Insight and Governance

Communicating clearly with investors is more critical than ever with markets gyrating at a moment’s notice – but what does this really mean in practice? In these uncertain times, we know firms have been working hard to ensure their investors are updated and reassured as soon as possible, however it is important that any efforts to reach out do not confuse (or even worry) investors.

Here at The Wisdom Council, we regularly help our clients with content that will engage investors, always keeping in mind the regulator’s focus on clear communications and the link with corporate culture. Based on this experience we have pulled together our top tips for communicating with your customers in a crisis:

1. Think about what a customer wants to know and address their concerns directly: be open and clear with investors and don’t shy away from telling them how it is – be authentic and they will thank you for it in the long run.

2. Tell a coherent story – does it flow, is it logical?

3. Keep messages straightforward, concise and consistent.

4. Clearly signpost what you are presenting and what it is designed to convey.

5. Break it down – filter out information that isn’t relevant and it is more likely that the important stuff will land.

6. Use pictures or metaphors to guide clients through information where it is complex or could be open to interpretation – but remember to label graphics clearly.

7. Don’t be afraid to use a Q&A format as the best way to present information for your audience – either in written content or better still in a live format that people can watch. For once, you might find that people have the time to click on links!

8. Take ownership of what is happening in terms of strategy or fund trades. Don’t talk in the third person. Not ‘The Fund has moved underweight…’ but ‘we have decided to sell xyz and here’s why’. Customers are looking for reassurance.

9. AVOID JARGON – At times like this, it is even more important that communications are clear and easily understood. With investment updates talking about ‘market dislocations’, ‘deep discounts’ and ‘fundamentals reasserting themselves’ it all feels predictably opaque.

Is your distribution mainly B2B? If it is, it’s important to still remember to ‘write for the customer first’ (as the FCA constantly reminds us). We know that time is of the essence when markets are crashing and you’re under pressure to communicate with multiple audiences. Think clearly about the needs of each audience. Depending on what time and resource you have available to pull content together, it might be better to focus on nailing customer customer communications first. This often helps you to focus on the key messages you are trying to get across. Then you can build out from there for advisers.

The Wisdom Council has significant expertise in delivering effective communications, applying what we learn through talking to customers and their advisers about all things investing. Just some of the services that you might find useful:

  • Editing or creating customer content – particularly useful if the team that normally generates content is understaffed or under additional pressure. Within team TWC we have experienced writers and editors who can help.
  • If you are building content but would like it reviewed by investors before you press send – TWC can offer a range of research and testing options with quick turnarounds.
  • Where more of your teams are getting involved in writing/approving customer communications and need guidance/training on what is and isn’t appropriate language. We can easily set up online training sessions and tailor them as needed.

We would be happy to discuss the full range of services that we offer, so please do get in touch if you think we can help.

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TWC are here to help you keep things moving in these difficult times.

Stay safe, and stay home.                  

As the COVID-19 outbreak continues, we are facing difficult challenges as our lives, both personal and professional, are impacted.

In these strange times, we wanted to let you know that, as far as possible, it is business as usual at The Wisdom Council in terms of our ability to deliver client projects. As you might expect, face-to-face research is off the table at the moment, but we have expertise in a wide range of innovative digital, online and telephone based research techniques that ensure we can continue to deliver insight and advice on any regulatory, strategic or tactical initiatives that you might be tackling.

We wish everyone the best in what are extremely difficult circumstances. In particular, our thoughts are with anyone whose families are directly affected by the virus or who have friends and relatives working on the front line in the emergency services.

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The first value assessment reports are out – how is the industry doing so far?

by Dawn Hyams, Head of Investor Insight and Governance

It was Andrew Bailey, now heading the Bank of England but formerly CEO at the FCA, who said “The effectiveness of communication with consumers is…a test of culture”.

The FCA’s request that fund management firms assess the value that they are delivering to investors in their funds has given rise to a flurry of activity across the industry. Combined with the arrival of iNEDs on fund boards and the fact that the assessment of value is called out as a formal responsibility under the Senior Managers’ regime, firms should be (and from what we can see many are) treating this as more than just a box-ticking exercise. In fact, from our perspective, conversations around delivery of value are prompting interesting and often challenging debates on value (and values), as well as the longer-term shape of the fund industry.

It would seem from the FCA’s recent ‘Dear CEO letter’ to fund boards, however, that they feel the need to reiterate the importance of the thought process behind the report – and expect to see evidence of challenge from the iNEDs.

It is certainly true that there are still some ‘pockets of resistance’, reluctant to embrace the cultural change that the FCA is calling for. Firms are also tackling value assessment in something of a vacuum – so it is reasonably difficult to get a handle on what ‘good’ looks like, given that there is no set format for reporting or the process behind it and that any guidance that has come from the FCA is open to interpretation. We keep coming back to the fact that this requirement fell out of the Asset Management Market Study and was prompted by the FCA’s view that too many funds were charging too much money for delivering close to benchmark performance to customers. The aim was to ‘out’ closet trackers and their close relations (again, a timely reminder on this in the FCA’s letter). The flipside, is that this can be seen as an opportunity for active managers to set out their stall and demonstrate the value they are adding.

Our observations so far on what good looks like…

Firms that are doing this well have genuinely considered customers as part of the process:

  • What do customers value?
  • What do customers understand about the fees they pay and what they get in return?
  • Is there a robust process behind the report to customers?
  • What was the quality of internal debate and how involved were the NEDs?
  • Do they understand your value assessment reporting?
  • Were the NEDs given enough information and time to be able to challenge the process effectively?
  • What are the remedial actions falling out of the process and how do these impact customers and their advisers?
  • How do you talk to customers about value assessment in a way that is meaningful to them?

Some of the reports that have been issued so far have completely missed the mark in our view – jargon-filled and with little context or explanation that will help customers understand why they should even pick up the report or care about what is inside. Will the FCA be more concerned with the internal process and debate? Yes, of course. For us, it comes back to whether or not the way you talk to your customers is a reflection of your culture. How seriously have you taken this process if you can’t even be bothered to report to customers in a language they understand?

Get in touch to find out how.

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Will sustainability shift the investment trade-off for good?

by Josh Blundell, Head of Research and Operations

Every purchase decision we make involves trade-offs. Chips (yum) or salad (healthy)? Another coffee (caffeine hit) or top up the glass water (hydrated)?

We all navigate these trade-offs, driven by both conscious and subconscious factors – physical needs, desires, my willpower on a Monday morning in grey January – countless logical and illogical but all very human considerations and biases.

But they are also driven by information – and this applies also to society as a collective.

The recent scandal with diesel cars is a good example. Diesel – once heralded as more efficient for longer journeys and so a less polluting alternative to petrol – is now recognised as more damaging to the environment. The shift in purchase behaviour in the UK (driven by changes to incentivisation such as expansion of low emission zones in cities) has been dramatic – diesel accounted for 31% of new car registrations in the UK in 2018[1], down from a peak of 50% in 2016 and continuing its fall last year.

Better, more comprehensive information helps us make better, more informed trade-offs, both individually and as a social group.

In the world of investments – no matter how complex we try to make it – the core trade-off has always been relatively straight forward: risk vs return. Even today, all the research will tell you that by and large investors prioritise return over all other considerations.

But the information available to investors, our collective knowledge, is changing, no more clearly than in the sphere of sustainability.

We have never been more aware of the impact that our purchase decisions have on our environment and our society. 2020 is only a couple of weeks old but the terrifying images of the bushfires in Australia are beaming pictures of the deep impact of climate crisis onto our screens 24 hours a day.

So, as we embark on the UNs self-declared ‘decade of delivery’, we could be approaching a tipping point. Will end investors start to prioritise factors beyond risk and financial return? Will the long-term sustainability of our choices start to tip the balance in the investment trade-off, away from the purely financial?

This is one of the key questions The Wisdom Council will be looking to explore in 2020. You can find out more here.


[1] Vehicle Licensing Statistics: Annual 2018, Department for Transport

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Embracing the cult of the customer

by Josh Blundell, Head of Research and Operations

Today is the day that the Senior Managers & Certification Regime (SMCR) kicks in for the asset management industry. The FCA hopes this move will strengthen market integrity by making individuals directly accountable and ultimately reduce harm to consumers – and lead to better long-term outcomes for the millions of investors whose money the industry manages. There is even a specific responsibility for authorised fund managers that covers value for money assessments, independent director representation and acting in investors’ best interests.

The conduct agenda pursued since the global financial crash has consistently signalled the need for a cultural shift in the industry. SMCR is the latest and perhaps the most persuasive prompt to date for firms to take a long hard look at their purpose and reflect on their role in the wider long-term savings landscape.

Is it really necessary for the FCA to spell out responsibilities in this way? Many of the customers we talk to on a regular basis would say it is. They still see remnants of the stale culture that placed little value on understanding end investors (though this outlook is thankfully far less prevalent than it was) and feel that they have to constantly remind firms just whose money they are running. In the wake of Woodford, customers are wary of the industry and there is no doubt that the reputational damage will take time to repair.

So can the industry rise to the challenge? The positive signs are there. We know that many teams at the product coalface in asset management have, for some time, been working hard to establish governance that genuinely considers customers and their needs. And not just because of regulatory pressures, but because it felt like the right thing to do. In some cases, they have met with pockets of resistance but with enough impetus from SMCR and with more NEDs starting to make their voices heard perhaps the tide is turning. The Asset Management Market Study remedies have already prompted a greater quality of debate in the industry – perhaps the SMCR will encourage firms to turn those words in to action.

There are some simple ways that you can create a direct line to end consumers that will go a long way to evidencing a robust response to SMCR – get in touch to find out how.