Advisors

(September 29, 2004) Financial advisors know little about socially responsible investing and therefore can’t offer useful advice on SRI products, an international online survey indicates.

Although the Internet study — conducted by a PhD student at Australia’s Macquarie University earlier this year — is not statistically valid with only 400 respondents, it does reveal some interesting insights about SRI.

About half of survey respondents, including participants from Australia, Canada, the U.S., Europe and Africa, said they have invested in SRI funds.

The other half said that they did not have enough information about SRI products, or that the information they had received was too complex or not credible.

“Whether they invested or not, most respondents were concerned with not being able to verify information, not being supplied enough information, and not being able to assess funds’ screening and engagement processes,” says study author Matthew Haigh.

The data also suggests that despite the attraction of social, environmental and ethical considerations, investors might not consider SRI to offer a complete investment alternative, Haigh adds.

Survey respondents who had invested in SRI held fewer product offerings and invested smaller amounts than those who owned mainstream funds.

Of the 200 or so respondents who had purchased SRI products, less than one third made their purchase through an advisor. “Financial planners were considered ignorant of SRI products and generally unable to offer relevant advice, Haigh says, adding that that previous studies in Australia have shown that 90% of mainstream fund investors use financial advisors.

More than half of those surveyed who had purchased an SRI product expressed concern that their portfolios did not adequately reflect the social and environmental values that had attracted them to social investing in the first place.

“Respondents spent considerable effort researching and monitoring the extent to which SRI funds construct their portfolios and expected fund managers to do the same,” the survey concludes. “The findings establish grounds for a special duty of care on the part of responsible entities that market their use of social, environmental and ethical issues.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com