Ethical investment is surging into the mainstream.
The newest wave of savers is switched-on, anxious about the future and more socially aware than their parents were.
But if you want to put your money where your morals are, how do you get started? A specialist financial adviser may have the answer.
Socially responsible investment is a wonderful idea, and like all wonderful ideas it’s a lot more complicated in practice. Only recently did Comic Relief get round to reviewing its investment policy to avoid arms manufacturers and tobacco, and that’s just the most embarrassing example of how easy it is to get it wrong.
Investments that look responsible on the surface may hide all sort of unpleasantness underneath, if you don’t know what to look out for. To capitalise on your good intentions, a careful approach is needed before you begin.
Remember it’s not either-or
Do you want the investments with the biggest returns, or the ones with moral responsibility? That might have been the dilemma at one time, but not anymore.
On average, ethical investment funds have been matching or surpassing standard funds in recent years. This is partly due to changing attitudes, but also to simple pragmatism.
Ethical investments are often described as ‘sustainable’ – and who doesn’t want their investment to be sustainable?
It makes sense to prefer investments that are likely to be encouraged in the future, rather than those which may be harder hit by legislation and tax.
Should you see a financial adviser?
Seeking professional advice may not be your first thought. Surely you can find enough information online?
Certainly you can – probably far too much – and that’s the problem.
Sifting through a lot of conflicting (and perhaps biased) information will usually involve a fair amount of guesswork, unless you can call upon a lot of specialist experience.
There are many fully independent financial advisers who specialise in ethical investments, who can help you sort the facts from the hype. Even more importantly, they will consider your arrangements as a whole.
Creating a proper financial plan ensures that your finances complement each other, rather than pulling in different directions (as can often happen when you arrange them in isolation).
One example of this is where you have too much money tied up in long-term investments and not enough accessible savings for emergencies.
A financial adviser can also take into account other key factors, such as your age, line of work and attitude to risk.
Choosing your ethical IFA
Many of the advisers who specialise in ethical investments are listed on unbiased.co.uk. You can search with your postcode to find a longlist of advisers near you, then use the site’s Ethical Investments filter to narrow it down to those who offer this service.
You also want to make sure that the adviser is right for your needs, so it’s worth contacting several before making your choice. The site also provides an adviser checklist to help you compare advisers objectively.
As to their ethical credentials, you should be able to explore these at your first meeting (most should offer this free of charge). A good test is to ask how they run their own business – do they have a strong corporate social responsibility ethos, for example? Some go to great lengths to practise what they preach, such as by recycling and composting their waste paper to grow vegetables – to give just one example.
Look for advisers who put their money where their mouth is, and you can be confident that your money will be handled with the same care and responsibility.
