New Model Adviser - For Professional Investors

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Why one IFA's clients are switching to ethical portfolios

1 Comment
Why one IFA's clients are switching to ethical portfolios

A nudge in the right direction was all it took for Thomas and Thomas to launch a pro-ethical proposition. It is now encouraging even mainstream existing client investors to take the leap into ethical investing.

Powering investment

My introduction into ethical investing began three years ago. I have always considered myself passionate about environmental and ethical issues so I was pleased to learn Thomas and Thomas was equally as enthusiastic on the subject. But, until recently clients with ethical funds lacked a comprehensive ethical investment service.

For nearly 10 years, our mainstream investors have received a full quarterly review service, called ‘Proactive’. We write to each of them individually, updating them on the progress of their portfolio and asking for permission to make any important switches. We desperately wanted to offer this same service to our ‘ethical’ investors.

We have been able to provide this premium service because Darren [Lloyd Thomas, managing director] was able to see many investor overlaps in client portfolios as far back as 2008.

This meant we were able to offer five mainstream model portfolios to our clients that we were able to attach each existing client portfolio to, where appropriate for them. We take a full week out every quarter to backtest and fully analyse these mainstream models. This costly discipline is the powerhouse behind our proposition.

Proactive approach

We were not sure whether ethical investors would accept a more consolidated proposition, with research and fund selection invested into models. Nor did we have enough critical mass of these clients to make a proactive service commercially viable for ethical portfolios.

We already had an ethical investment questionnaire in place, as well as ethical branding and an ethical investment process. However, we wanted to expand this area of our business. We wanted to help existing ethical clients but also try to do more to help society and the environment. Darren had been talking for years about a pro-ethical proposition that compared to our mainstream investment proposition but he needed a nudge.

Taking the plunge

We looked more closely at our ethical clients’ demands and came to recognise they mostly had common ‘negative screens’ and ‘positive screens’ that could be entered into a consolidated model.

We started contacting our ethical investors personally. We found their initial feedback about a new pro-ethical quarterly review service linked to models encouraging.

In January this year we took the plunge with three pro-ethical models. Our existing ethical investor clients’ response was fantastic and 100% of them wanted the service. In fact, a number of clients said they would invest more money now they could achieve the more comprehensive service.

Darren moved the business’s own investments to our pro-ethical portfolios. He agreed we would carry out all moves to the new Pro-Ethical service at no initial cost to the client. We needed to undertake each client matter individually with full reports, file notes and illustrations. This even involved moving clients across platforms in some cases. This involved around 180 hours of work.

Growing and growing

Over the following months of hard work, we gathered more momentum. We launched our ‘Thomas and Thomas Ethical’ web page, complete with ethical news that we wrote ourselves. We even created our first ethical video to explain how screening works.

We kept our mainstream clients in the loop about this new service via regular articles and annual reviews. To our surprise, many existing mainstream investors (who have not previously expressed any interest in ethical investing) promptly asked to move their assets across to the Pro-Ethical range as well.

There are varying reasons for investors moving to our Pro-Ethical service. These include a response to US president Donald Trump’s attitude towards environmental agreements, the vast amount of plastic in the ocean, corporate greed and unfairness, and just good, old-fashioned diversification.

In total we have moved nearly £7 million of our client assets across to this proposition since January; over a sixth of our total client bank. The pattern shows no sign of reversing.

Katy Owen is a financial planner at Thomas and Thomas Financial Services

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Comment & analysis