Financial planners to play pivotal role in growth of social investment

13/6/12

Financial planners can play a pivotal role in growing ‘social investment’ - the take up of products that have a measurable positive social impact – according to a new report published today by Nesta, the UK’s innovation foundation.

'Financial planners as catalysts for social investment', shows that, as gatekeepers to the financial affairs of wealthy individuals who may be interested in making social investments, financial planners have a growing opportunity to serve their clients better by informing them of new social investment products and opportunities.  

The report, written by Antony Elliott (CEO of the Fairbanking Foundation), Gavin Francis (founder and Director of Worthstone) and Geoff Knott (a UK social investment practitioner with international experience) provides recommendations on further action required by product providers, FSA accredited bodies, Government and regulators to ensure that the social investment market reaches maturity.

The report has been warmly welcomed by both the Institute of Financial Planning (IFP) and the Chartered Insurance Institute (CII), with the forward written by Nick Cann, CEO of the IFP and David Thompson, Head of Policy and Public Affairs at the CII. 

Key findings are:    

• Social investment would come from client funds surplus to an allocation that ensures financial security; the most appropriate client is likely to be a 'high net worth investor' (HNWI).  In fact, client demand from HNWIs will ultimately drive financial planners to become involved in social investment.
• At present it is highly unlikely that many financial planners have a good understanding of which clients would be receptive to social investment opportunities. The  factfind/discovery process provides the opportunity to explore a client's motivations around using part of their capital to generate a social return as well as a personal financial gain, and the report includes recommended questions to open those discussions with clients.
• Both financial planners and clients need to  understand and recognise social investment as a distinct new asset class that is separate from straightforward financial investment and giving/philanthropy.
• Early adopters within the financial planning profession are likely to be those with a desire to do some social good through their work. This is not the same as those that have socially minded clients, although there may be a considerable overlap.  
• Social investment product developers need to keep products as similar as possible to existing ones with which planners are familiar.  Financial planners want to deal with product structure issues relatively easily and then focus on why a client may be interested in anticipated social outcomes.
• Clear and effective communication of information to both investors and financial planners will be essential.  As with any new asset class, there is also a need for profile-building to educate the financial planner and the client.
• The regulator will need to provide clarification over how suitability should be understood for social investments. This will help planners to advise their clients in the current, cautious, financial advice market.
• The current tax regime does not encourage social investment; in fact lack of tax incentives adds a layer of uncertainty on the societal value of social investment.  A new tax incentive would create significant  new interest from financial planners in social investment.

Gavin Francis, Founder and Director of Worthstone, says: 'At this time of significant change in the advice arena, social investment offers a rare and important new opportunity to the financial planning community. The report acts as a vital roadmap for all those interested in optimising the unique 'win-win' that social investment can deliver for individuals and the society within which we all live.'        

Joe Ludlow, Director at Nesta, says: 'This report provides clear recommendations for key stakeholders who are involved in the individual social investor supply chain. The potential appetite for social investment amongst this segment of the investor base is clear - we hope these recommendations can be acted upon to strengthen and grow this flourishing new asset class.'

ENDS

Notes to editors:

For information on the launch event, please contact impactinvesting@nesta.org.uk.

For further information or to request an embargoed copy of the report, please contact Martin Campbell on 07802 634 695/ martin@beaconstrategic.com  or Guy Bilgorri on 020 7438 2611/ guy.bilgorri@nesta.org.uk/

About Nesta:

Nesta is the UK's innovation foundation. We help people and organisations bring great ideas to life. We do this by providing investments and grants and mobilising research, networks and skills.  We are an independent charity and our work is enabled by an endowment from the National Lottery.

Nesta Operating Company is a registered charity in England and Wales with a company number 7706036 and charity number 1144091. Registered as a charity in Scotland number SC042833. Registered office: 1 Plough Place, London, EC4A 1DE

www.nesta.org.uk 

About Worthstone:

Worthstone was established to help to bring the social investment sector to maturity within the UK by aiming to introduce the mechanism through which this emerging asset class could be incorporated within mainstream financial advice.  

As such Worthstone has become an independent hub of specialist expertise, providing an interface for the growing community of advisers, planners and wealth managers, as well as social investment product providers, who share Worthstone's vision for seeing client money invested for social good.

The focus is wholly and exclusively on social impact investment solutions for the financial planning and wealth management profession.

www.worthstone.co.uk