FundsPeople | September 2022
When it comes to sustainable investing, it is better to seek the assistance of fund selectors. Fund selectors are experts in selecting and can identify ESG tools with a higher degree of precision than financial advisors or private bankers. In a survey shared, in an exclusive preview, with FundsPeople, FINER Finance Explorer has compared the viewpoints of the above-mentioned professional groups. In March 2021, Finer launched a survey involving 170 fund selectors and 5.000 financial advisors and private bankers concerning the issue of sustainability. The interviewees were asked what asset managers were, in their opinion, more credible when offering ESG-compliant funds, that is with a wider range of truly sustainable products. Thereafter, the answers were compared to the data provided by Morningstar, which identified the companies with the largest number of funds classified as article 8 and 9 by SFDR.
The comparison revealed that the three first companies mentioned by fund selectors coincide with those identified by Morningstar using objective and measurable criteria. However, the opposite applies for managers and private bankers. “The coincidence between the perception of fund selectors and the objective data provided by Moningstar suggests two considerations,” explains Nicola Ronchetti, founder and CEO of Finer. “First of all, fund selectors have more rigorous knowledge of asset managers. Indeed, fund selectors are familiar with AMCs and know which have a higher concentration of article 8s and 9s,” Ronchetti adds, reminding us that fund selectors dictate the policy that guides the investment choices of their company. “Therefore, the first information we can gather from this comparison – Ronchetti continues – is that fund selectors have more objective knowledge of the market”.
Secondly, the presence of “a rooted sense of responsibility among fund buyers towards commercial networks, more easily influenced by external factors and subjective perceptions. This often results in a less varied sale proposal, as it focuses on the asset managers deemed more ESG compliant”. Therefore, because of the analytic nature of their role, fund selectors can better identify the funds truly geared towards sustainability; so, is there miscommunication between those who (correctly) select funds and the supply chain? Or, are financial advisors being persuaded by external factors?
Curiously enough, there is no coincidence between the first three ESG-compliant societies mentioned by fund selectors and those mentioned by financial advisors. “Since they work within the same chain of command, we ought to understand what happens between initial decisions and final distribution to clients,” Ronchetti continues. “In fact, what could affect financial consultancy is the activity of single AMCs in the field of distribution. It is no coincidence that some networks do not promote roadshows among their financial advisors when they have not been organized in concert with the bank/financial network itself,” he underlines. It is a matter of impressions, then. However, there is always a chance that the information provided by fund selectors – maybe spread merely though weekly emails – is not being analyzed and digested by financial advisors with due attention.
How to fill in this potential communicative gap, then? “In our opinion, fund selectors should carve out a more important role for themselves within their company; moreover, their role should be recognized by banks/financial networks. Indeed, the CEO of a large bank or financial network should enhance the technical skills of fund buyers, which coincide with objective elements, and communicate them to the sales network. All this without detracting from the autonomy of each individual financial advisor or private banker,” underlines the founder of Finer.
This issue is all the more meaningful when we analyze the nature of ESG investing. ESG investing is renowned and highly requested among affluent clients. Such investors can intercept the largest share of the market. Thus, in order to avoid reputational issues and more, it is necessary to carry out a careful analysis aimed at selecting truly sustainable investment products and at identifying any greenwashing tendency.
Moreover, a careful analysis of the issue of sustainability can have an important impact on potential clients. A large number of savers, who are not yet investors, are potentially interested in ESG dynamics. “It is not about being top of the class when it comes to sustainability. There is, however, the necessity to introduce the public to the world of asset management, especially those who today do not seek the assistance of financial professionals when it comes to managing their assets,” Ronchetti underlines. “The world of ESG investing can be a precious tool to achieve this goal, as long as sustainable investing is well explained and certified,” he concludes.