ESG has doubled in importance for advisors in 2021: Investment Trends

Kurt Mayell of Investment Trends

Responsible investment practices have doubled in importance for financial advisors through 2021 according to researcher Investment Trends, which calls them the fastest growing priority area for advisors right now.

While diversification (68 percent), capital growth (37 percent) and liquidity (31 percent) were seen as the most important priorities for advisors throughout the year, investing responsible was the fastest growing area at 27 percent according to that of the group 2021 Advisor Product and Marketing Needs Report.

Over the past year, more than 40% of customers have requested to trade investments based on environmental issues, research reveals, up from 24% in 2020. To meet the growing need, product providers will need to increase their collective spending in research. in ESG areas according to Kurt Mayell, associate research director at Investment Trends.

“Advisors who prioritize ESG investing expect to use a wider range of products or increase their use of active management,” Mayell says. “To enable the growth of ESG investing, advisers believe that product providers should put as much effort into research and data analysis as they do into issuing new products.”

The researcher also notes a need for more education on recent compliance requirements related to design and distribution obligations, with many advisors indicating that they wanted assistance with issues related to “target market determination” and implementation tips.

“2021 has been particularly prolific in terms of additional regulatory compliance burdens,” Mayell says. “When it comes to DDO, there are significant educational opportunities, starting with the jargon itself. Almost four advisors on fiev rate their understanding of “large transactions” as average or below.