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How advances in tech are allowing more individualisation for responsible investment

Guest authors

Next generation technology is harnessing opportunities for individualisation in model portfolios and supporting client preferences around responsible investment.

2019 may be remembered as the year when climate change and saving the planet finally became key priorities for the majority of governments in the West.

And on a more individual level, as we enter a new decade, more people are proactively looking to make responsible and sustainable choices in all areas of their lives to help protect the environment for future generations. There’s evidence of growth in everything from green energy and ethical clothing to sustainable transport and recycling.

So it follows that green issues are becoming more mainstream for your clients, giving you an opportunity to engage them in a deeper way with their investments.

In the UK, the FCA has asked advisers to respond to their clients’ increasing demand for sustainable and green investments. In addition, considering clients’ preferences on responsible investment is set to be a mandatory part of the suitability process.

Helping clients in their choice of responsible investments

There are a couple of different approaches used to invest responsibly in the industry. One approach is stewardship to influence positive change within a company. The other approach is to incorporate environmental, social and governance (ESG) factors into overarching investment processes, and in the design of individual funds. There are three main strands to this:

  • ESG integration: a process used by investment managers to analyse a company’s approach to ESG to help spot opportunities and manage risks when they’re building portfolios
  • Screening: funds that exclude negative or include positive investments based on ethics and values
  • Thematic: funds aiming to achieve a financial return alongside a specific environmental or social outcome

Allowing you to offer a wider range of model portfolio technologies

Until now, model portfolio methodology on platforms has been very traditional in terms of its allocation of assets.

However, this growing need for more tailored solutions to reflect a client’s responsible investment needs has driven the development of new platform technology; technology that can help you offer a higher degree of investment choice customisation for clients.

This new platform technology can cater for asset exclusions so that your model portfolios can align more closely with clients’ responsible investment preferences, and giving you a wider range of model portfolio methodologies to use.

For example, if a client wants their portfolio to be carbon neutral, next-generation technology allows you to automatically shape a carbon neutral portfolio by excluding those assets which do not meet that requirement.

Using this technology also means that your execution costs can drop significantly. Once you’ve worked out the desired customisation to your portfolios, and established the parameters for asset exclusions, the technology can take over.

As an adviser, being able to meet your clients’ requests to invest responsibly means you can provide a more tailored investment solution

As an adviser, being able to meet your clients’ requests to invest responsibly means you can provide a more tailored solution for clients with the assets they want, in the categories they want, while maintaining the strength of the model portfolio to support good outcomes.

In a nutshell, it’s technology that takes the benefits of both model portfolios and bespoke portfolios, and allows you to manage the investment proposition with the consistency and control that platforms provide.

Next-generation platform technology is helping to shape the business models of the future. It’s exactly why this technology will continue to transform the way advisers and DFMs can deliver advice.

Individualisation and an all-round client-centric service, where responsible investment can be catered for, now represent the future of client-led investment solutions.

Speak to your usual Standard Life contact for more details on how next-generation technology on Standard Life’s Wrap platform can help you deliver individual solutions for your clients, or see our Individually Managed Accounts page.

The value of investments can go down as well as up, and could be worth less than originally invested.

The views expressed in this blog should not be regarded as financial advice.