Wealth Management and Private Banking

Wealth Management and Private Banking



Expert: Peter Michaelis, Liontrust

Facilitator: Tasha Vashisht

Key message 

Responsible investment tactics are becoming increasingly common among clients. However, the industry is struggling to catch up with a scalable responsible investing proposition. 


  • Institutions already recognise SRIs - private clients will follow
  • The wealth and investment management industry is at a point of change, with clients increasingly putting pressure on advisors to deliver ethical investment policies
  • Formulating a single SRI policy is proving to be a challenge 

Key themes 

The initial discussion started with introductions and participants sharing thoughts on their experience with SRIs. The discussion attracted wealth management firms’ representatives, private client investment managers and assets managers, and a provider of SRIs. The latter expressed an interest in hearing which difficulties wealth and investment industry players have with implementing SRI. 

The general sentiment of the industry operators was that they understand and commit to SRIs as a concept and see it as an opportunity. However, it is challenging to translate client interest into a set of products and services. Currently, demand for socially responsible investing has not yet evolved into a clearly-defined offering for most of those present. 

The discussion went on to present the view of an expert that the industry is at the cusp of change regarding SRIs. The main driving forces behind it are demographics and the nature of savings, connectivity, and, contrary to common misconception, existing evidence that companies that are better for society are performing better financially. 

Demographic argument has to do with the fact that the NextGen / NewGen have strong values and cherish experience of the investment. However, midults are also taking opinions of other people, cross- check with friends, and are not just listening to their advisor. Connectivity between the individual investor and the firm invested in is important because clients will inquire why their portfolios have a firm that has been featured in scandalous media publications (e.g. Volkswagen). They will be asking their advisor “why did you miss it?” In terms of evidence in favour of financial performance of SRIs, recent experience of asking the question “Over the last ten years has your ethical investment strategy underperformed?” has shown that very rarely investment firms say “Yes”

Ethical investing has grown rapidly in the last 15 years. 

“I met one person who said that ‘ethical investment is something only the teenager thinks about.’ But the implication of that is that they grow up”. 

Ethical investing has to do with the client relationship because they are interested in earning 4.5% on their portfolio and would like to know what kind of firms are invested in. Generating the return and also fulfilling socially responsible investing is proving to be a challenge. There is pressure from clients to offer SRIs, but there is no “one-size-fits-all” solution. One of the participants suggested that SRIs should be part of the overall investment strategy, rather than offering a binary approach – either ethical investing  or not. 

SRIs are currently pushed by institutional investing. The general understanding was that where institutions are today, private clients will follow. There were remarks from participants that the industry was guilty of distracting the clients from ethical investing: 

“We as an industry are good at listening to financial needs but everything else – we say ‘it’s too complicated”. 

An additional complication in terms of formulating an SRI offering comes from the fact that clients do  not say what they want. Rather, they say what they don’t want to hold – for example, tobacco company shares. This principle of exclusion contributes to difficulties of rolling out a responsible investing proposition to the masses as it involves a high degree of bespoke portfolio development. 

Some tips from the crowd included focusing on where the future industry will be positioned, eg. tech- heavy healthcare. This principle allows the definition of an area where one can make an impact with the money. Another recommended approach was to look at big trends in the economy, for example, improving energy efficiency, or better lifestyle. An example was given of how macro trends relating to  car passenger safety in the UK were used to select investments. 

As a case study, Inditex’ strategy of focusing on manufacturing close to home which meant faster deliverable times was showcased as socially responsible practice, even though the original motivations was not seen to be socially responsible, but rather efficient. 

Another area discussed was transparency regarding the list of companies held in a  portfolio. Occasionally, clients may have a binary view of a brand rooted in current affairs and will challenge advisors to explain investments that are undermined by a poor corporate responsibility reputation. However, this paves the way for a positive conversation that assesses the company’s social responsibility profile at a global level. 

Further to the dynamic of conversations with clients, participants noted that when impact investing is discussed, clients are looking for closer involvement. This requires expectations to be carefully managed. 

By the end of the discussion, the importance of communication was mentioned. The definition of what is ethical will vary from client to client, and expectations with it. However, the industry is encouraged not to let difficulties in defining individual investors’ SRI objectives hold them back in defining their offerings. 


  • Responsible investing is currently implemented on an ad-hoc basis
  • Principle of exclusion is exercised by clients when opting out of ethical investing, which further complicates a SRI proposition
  • Communication is key when implementing ethical investing principles – both the financial and social implications are important to discuss to manage expectations