The Financial Conduct Authority introduced a fourth investment label following consultation – ‘sustainability mixed goals’ – for products invested in a mix of assets that are already sustainable, have the potential to improve their sustainability over time, and/or aim to achieve a positive impact.
“The sustainable preferences questionnaire is not available in the EVPro financial planning software, but it is available for hybrid advice software,” adds Storey.
“When you don't have an adviser involved, or they get involved later for hybrid advice, it's an option for an advice firm to be able to ask those questions that would normally be a part of a discussion with an adviser.”
At Dynamic Planner, chief proposition officer Chris Jones says the SDR and investment labels regime will not affect the questions asked in its sustainability questionnaire, which takes a psychometric approach to capturing client preferences, or how it presents results to users.
“When we built the questionnaire, there was pressure to link the responses to a fixed measure or category of investments,” says Jones. “But we resisted that, because we want the adviser or the advice firm to be able to make that decision.
“Our sustainability questionnaire is psychometric, and measures the level of importance that a person places on sustainability. It does not tell them how to invest, just how they compare to the population as a whole.
“Importantly, it has delivered consistent results throughout the recent years and global events that have changed the relative values of sustainable and non-sustainable investments, thus doing its job of managing out such external factors.”
Likewise, James Pereira-Stubbs, chief client officer at behavioural finance fintech provider Oxford Risk, says its suitability assessments already capture an investor’s sustainability and ESG preferences in line with SDR.
“We have followed the Mifid directives very closely and continued an open dialogue with the FCA,” he says. “So we strongly believe that our ‘Investor Compass’ solution continues to future-proof firms in the face of changing and evolving SDR regulation, meeting the spirit and letter of which the law has been created.”
Pereira-Stubbs adds that focusing on the spirit of the rules reliably satisfies the letter, but that the reverse is not always the case.
“For example, you could design a process that prompted an investor to state simply, ‘Yes, I’d like some ESG’, and end up with a token gesture allocation to a fund that changed its name to include ‘sustainable’ a couple of weeks before,” he says.
“That would tick the box, but it would be a stretch to call it suitable. It would meet the letter of the law, but it would insult the spirit of it.
