Problems faced by Independent Financial Advisers in the further enhancement of the market for Ethical Investments

Abstract

Ethical investment is a small but growing market, particularly for retail Ethical Investment products. Within this sector of the UK financial market, Independent Financial Advisers (IFAs) hold a key position placed as they are between consumers and suppliers, and have the potential to expand the market for Ethical Investment. It is suspected that several problems inside the market for Ethical Investment and the UK financial service sector are hindering the IFAs to do so. Hence, the purpose of this study was to discover the difficulties of Independent Financial Advisers (IFAs) to develop further growth of the Ethical Investment market in the UK. The specific concern was to look at the challenges, but also the opportunities Ethical Investments have to offer for IFAs. The analysis is based on in-depth interviews with ten experienced professional IFAs, with an average of 15 years each of advising on Ethical Investments. All the IFAs were based within UK advisory companies, representing a cross-section of sizes between 2 to 8000 people. The participants were each interviewed by telephone with a semi-structured questionnaire. The results revealed several problems IFAs face in their work, whereby the lack of demand from clients for Ethical Investments products is considered to be the biggest impediment to growth in the sector. Additional problems include a lack of transparency about what lies behind products, a limited choice of funds, and a lack of collaboration amongst partners in the investment chain. The provision of adequate training in Ethical Investments is considered as crucial to encouraging interest and development of this area amongst IFAs. A number of actions were suggested which could be undertaken by the actors inside the financial market to eliminate some of the barriers to Ethical Investment. These include the offer of a wider range of funds, a better service including information flow and communication from fund and service providers, and more marketing and promotion for Ethical Funds to raise awareness. Perhaps the most significant suggestion to help raise demand was to provide every customer with the option of investing in Ethical Investments, rather than only those who ask for it