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Wealth managers could better understand clients’ sustainability goals

22 April 2021

April French Furnell

According to new research from EY within its 2021 EY Global Wealth Research Report, wealth providers are failing to keep up with clients’ beliefs.

While half of clients believe wealth managers understand their goals, 41% feel their provider could understand those goals better and 5% think firms don’t understand them at all.

Clients’ sustainability goals are also key drivers in their selection process of a wealth manager. The report found that 35% of clients who have sustainability goals are looking to switch wealth managers in the next three years, over twice as many as among clients without sustainability goals (15%), and a quarter of millennial clients see sustainable investment propositions as the most important factor when selecting a new wealth manager.

The growing importance and awareness of specific environmental, social and governance (ESG) themes has increased over the past year which could see a major reallocation of investments: 76% of respondents believing it is important to consider ESG parameters in their portfolios and impact investing is expected to grow 15% by 2024, reaching an average adoption level of 35%.

The fact that ESG is personal to each individual will add another hurdle for wealth providers in their bid to understand every client’s unique needs, and to deliver against them.

The report found that clients also want to change the investing techniques used. Positive screening — “best in class” selection — is expected to grow by 23%, thematic investing by 7% and outright philanthropy by 15%. On average, interest in these techniques is higher in Europe, Asia-Pacific and Latin America than in North America, and stronger among younger and wealthier clients.

Above all, impact investing is expected to grow 15% by 2024, reaching an average adoption level of 35%. Adoption rates among some groups will be even higher, exceeding 50% among ultra-wealthy investors, millennials, and Asia-Pacific clients.

Clients’ expectations, and demands, will raise some challenging questions for wealth providers. The research shows that clients with sustainability goals are twice as likely to use alternative investments, forcing providers to offer asset types that they may not have a proven expertise or track record with, creating a potential need for new and innovative partnerships with specialist providers.

But it isn’t all bad news, as ESG investing also creates opportunities for firms that can harness superior client insights to build enhanced offerings, according to the report.

View the findings here: 2021 EY Global Wealth Research Report

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