Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a656055

FSA to guide IFAs on social impact investing

by Rachael Revesz on Feb 07, 2013 at 07:57

FSA to guide IFAs on social impact investing

The Financial Services Authority (FSA) is to meet IFAs to discuss how they can safely advise on social impact investments.

Amendments to the Financial Services Bill have put pressure on the regulator to liaise with the profession on social impact investment, a task given to FSA head of investment policy David Geale.

Geale (pictured) told New Model Adviser®: ‘As with ethical investments or environmental investments, we accept that, perhaps for part of a portfolio, making a financial return may not be a client’s only or primary objective.’

He said advisers would have to consider and record all relevant factors when it came to client suitability, and explain disadvantages, such as risk to capital invested and poor liquidity due to a weak secondary market.

Geale will give a speech on 26 February at a social impact investment conference organised by Gavin Francis, founder of Watford-based Worthstone. ‘We’re delighted with the recognition the FSA has now given to social investment,’ said Francis. ‘We see this development as a crucial stage on its journey to becoming an established asset class in the eyes of the wealth advisory community.’

Brigid Benson, principal of Manchester-based Gaeia, said many IFAs were cautious about advising on social impact investing.

‘The FSA is trying to reverse the situation, but the reality is advisers have felt they can’t and should not talk about social impact investment, and have struggled to get professional indemnity insurance for it,’ she said. ‘These investments are essential for the future of our infrastructure, for dealing with environmental and human wellbeing.’

36 comments so far. Why not have your say?

Hugh Jars

Feb 07, 2013 at 09:01

''Guide'' Endorse = Advice, in any other language.

Where do you draw the line?

If it does actually come to anything The 'guidance' the FSA (should we not be just calling it FCA by now? ) will contain so many caveats, that it will make the guidance itself totally worthless.

99.9% of my clients recycle their rubbish, turn off lights etc, but when it comes to a return on their investment, you can forget accept settling for a lower rate in the hope that China only build one new power station this month, and not the usual two.

report this

John Burchett

Feb 07, 2013 at 09:30

Are there not more important issues to be addressing.

The FSA will have us donating a % of income to their pension fund next.

report this

John Smyth 3

Feb 07, 2013 at 09:35

Can't they just get on with regulating and leave advising to those best qualified.

Their track record on regulation to date has been abysmal, having failed at almost everything they were supposed to have done. That is of course except for Hector Sants, Amanda Bowes, Peter Smith and several others picking up knighthoods and/or cushy new jobs.

I could not help thinking of Hector Sants yesterday when the NHS report came out on the South staffs hospital. The current head of the NHS nationally is a guy with a knighthood who was in charge of the Primary Healthcare Trust that oversaw the awful South Staffs hospital.

Failure pays in modern Britain!!!!

report this

Smudger 2

Feb 07, 2013 at 09:36

@John, we already are...

report this

Kate Brookes

Feb 07, 2013 at 09:43

I think this is a brilliant idea, I had an enquiry about Social Investing last year, and felt I couldn't get involved in any advice regarding this field, as I did not know enough about it, or even if I was allowed to become involved in this type of investment. This year I would presumably have to consider it, or find an expert in the field to refer to in order to demonstrate independence. I did go and do some research about it at the time however because I found it really interesting. (Must make sure I have recorded that on my CPD - note to self!!)

.

I do know people who would be interested in this type of investment, perhaps as part of a portfolio with all the appropriate caveats it could work. I have clients in ethical portfolios who were well aware at the time they invested that they were deliberately excluding certain things that would be likely to give them a better return. I remember when ethical investing was seen as a bit of joke, and now I get more and more enquirers regarding this.

Will this be regulated and covered by FSCS I wonder? Where will we get the CPD ? Does 'talking to us' involve the offer of a course? Sign me up then FSA/FCA....bet I hear nothing more about this.

report this

Hugh Jars

Feb 07, 2013 at 10:01

@Kate

They can't provide you any guidance........... they can't endorse anything......all they can do is make hindsight judgements about investments (ArchCru, Keydata, etc blamethe wrong people.... wreck investment sectors Life Settlement Trusts which worked find, until they fired off un-educated warnings that were pointless and have made clients investments ILLIQUID, where before they worked perfectly....

They not only close doors when horses have bolted, they look in the worng stabels...

report this

Hugh Jars

Feb 07, 2013 at 10:02

apologies for my dyslexic spot

report this

Ian Lees

Feb 07, 2013 at 10:04

To ask the failed regulator for "guidance", must surely be a joke ? It is like asking the NHS Trust to look after patients - the patients ( many now dead ) would have been safer with Jimmy Saville .

This is just another red herring for incompetence .

So while David Cameron discusses the merits of marriage for gays - and quotas of dead fish - being used rather than being placed back in the sea - th eUK consumers have lack of responsibility by teh most senior in the establishment i.e. cameron and osborne and his cronies. For goodness sake lets bring back hanging or at least public flogging for these insutling incompetent - useless failures in Gov't, The FSA and UK Plc.

report this

Kate Brookes

Feb 07, 2013 at 10:50

So, you are saying I will probably have to study this and then discount it in order to maintain independence, whilst saving my own backside at the same time? That is ridiculous. Without any guidance or formal training what else can we do?

I wish someone could shed more light on this..........

report this

T.Hines

Feb 07, 2013 at 11:04

The development of Social Impact Investing (SII) is both extremely worthwhile and excellent news for the Independent Advisory sector. There is a huge difference between market innovation and marketing opportunism. As Advisors we have quiet understandably become very risk adverse to new areas of investing, and at times dismissive. The excellent work that Worthstone are doing to ensure that the whole area of Social Impact Investing is introducted to the UK in a proper, controlled, informed and governed approach, is to be commended. Yet again the UK is leading the world in positive capital market development and for proof of this you only have to look at the credential of those speaking at the SII Academy launch on 26th Feb 2013 at the Guildhall. This is no flash in the pan but rather an enormous market in the development. As advisers, SII allows us to do what we do best - to engage with clients to provide financial advice, with knowledge and professionalism.

report this

Hugh Jars

Feb 07, 2013 at 11:06

@Kate,

yes, you will have to 'study' social impact investing, in order to be able to discount it... in the same traditions as any other stuff such as Unregulated scams, Structured products, ETF's VCT's EIS etc which many IFA's don't touch but are now regularly knowledge-tested on.....

(I hasten to add, though, nothing wrong with structured , ETF's VCT EIS etc)

They are running out of ideas....

report this

Kate Brookes

Feb 07, 2013 at 11:25

@ Hugh Jars

They'll soon be expecting us to discount the National Lottery and the local raffle down the pub as well I don't wonder.

report this

Mr Man

Feb 07, 2013 at 11:25

I feel sorry for UK IFA's ... Now hear this..

You just listen to those who know better than you and always will........... THE UK FSA. Never for one minute try and exercise discretion through knowledge and experience and expect to be supported.. Wait to be told to jump.., or by the power of christ the regulator, so help me god the FOS you shall be struck down and banished for ever more you naughty little UK adviser you.

Stick to cash and large provider managed funds ya and wait for me to take your clients off you.

report this

Kate Brookes

Feb 07, 2013 at 11:34

Oh lordy, that's all we need in any sensible debate. Mr man the troll is back again.

report this

T.Hines

Feb 07, 2013 at 11:53

The developing market for Social Impact investing (SII) in the UK is very exciting. In fact, I understand that once again the UK is will advanced in being recognised a the world leaders in developing capital markets for Social Impact Investing - can this really be a bad thing. The work Worthstone is doing to ensure that the market development of SII in the UK, is well governed and controlled; with IFA's being fully informed and supported in understanding all aspects of this sector - should be truly commended. If you doubt this, you only have to look at the credentials of those speaking at the forthcoming SII Academy launch at the City of London Guildhall on 26th Feb 2013. As advisers, it is easy to understand why we sometimes feel sceptical but it is important for us to recognise innovation over marketing opportunism. SII gives us the opportunity to do what we do best - provide professional unbiased advice to those that wish to pay for it.

report this

Mr Man

Feb 07, 2013 at 12:24

@ kate. There can never be a sensible debate with a UK IFA . You had your opportunity to be professional, wasted it, and now you are so constrained by what you are allowed to do its almost pointless doing it. Ha ha

report this

Duncan Carter 2

Feb 07, 2013 at 12:31

The problem here is that social impact investing will need to be incentivised or structured via specialist investment providers. These will be capital intensive with a long and inflexible investment period.

The regulator has rightly clamped down on UCIS but has been less revealing on the likes of EIS/VCTs etc which are probably the likely vehicles that SII investment wil take.

So Mr Geale is on the horns of a dilemma, he is tasked to promote SII but it is unlikely that this will gain much traction because of the FSAs past actions.

Some firms have included esoteric investments in diversified portfolios in the past only to find when they have failed, that the regulator holds the firm accountable notwithstanding failures at regulatory, ACD/Trustee, depositary, auditor and legal levels.

Who and why would one want to take the risk in this area in the future?

report this

Richard Essex

Feb 07, 2013 at 12:58

FSA /FCA guidance is all well and good. I would however like to see them embrace the concept as well. Social Impact investing is very new and needs the whole industry behind it. Whilst on the subject I think the regulators and professional bodies should be more behind SRI and Ethical investing.

There are some really interesting developments happening in the retail sector, which can show that rather being a hindrance to risk adjusted returns this type of screening can be a benefit.

This is worth embracing !

report this

Mr Man

Feb 07, 2013 at 13:46

@Richard Essex ..."worth embracing" but you dare not through fear of reprisal. You should as such advise all clients that you see that you are "precluded from advising on an investment worth embracing due to regulatory restrictions imposed on UK advisers".

@Duncan Carter 2. Exactly. So why would I go to a UK IFA who has become risk adverse through fear on virtually every new opportunity that presents itself to the market.!

report this

Duncan Carter 2

Feb 07, 2013 at 14:01

@Mr Man

You're not actually adding any value here. There is an old adage which is if you have nothing constructive to say then don't say it. I'm not looking for another diatribe but as you're clearly so wise, why don't you just bugger off and blog on the Dail Mail website.

Kate Brookes was right, oh and why not use your own name if you're so confident of your views!

report this

Kate Brookes

Feb 07, 2013 at 14:08

Mr Man really does speak some unmitigated clap trap, the majority of most UK IFA's clients are in the UK, what does he expect us to do? Passport to Outer Mongolia to advise on Yak futures?

As has been previously suggested, Mail-online Mr Man, you will feel quite at home there.

report this

Kathy Booth

Feb 07, 2013 at 16:30

For those who would be interested, there is an event at the Guildhall in London on 26th February 2013 on Impact Investing, by the Social Impact Academy.

There will be some interesting speakers there and it is CPD approved.

report this

Usually found sitting on the fence

Feb 08, 2013 at 10:41

As an ignorant individual, I have no idea what would be an example of an SII... A little part of me is picturing community farms springing up or new allotments as an investment, but I am sure this is not quite right. However, I think it matters not what the investment is, it matters more what the FSA believe to be acceptable risk (and as Mr Man rightly points out, usually this comes well after the point of failure). So the sort of guidance that the FSA could be giving would be whether there is a certain type of investor they feel more suited, whether they believe there should be a cap on exposure, whether there is any protection to the investor and whether the available offerings to the market are to be monitored or pre-approved schemes.

As for Mr Man's comment about using a UK based and regulated IFA, I think the clue is in them being UK based and regulated. Gives a certain feeling of dealing with someone who has achieved certain qualifications and recognition as suitable... After that you base it on personality and your perception of character. I know, I do :-)

report this

Hugh Jars

Feb 08, 2013 at 11:19

Being intrigued, and a bit cynical, of the fact the FSA seemed to be indirectly 'endorsing' something, I took a quick look at the website of the organisation (Worthstone) - orgainsers of the conference at which the FSA are going to speak,

Take a look at the 'Products ' the main one (of 2 available) Charitable Bond pasted here - verbatim;

''Charitable Bonds are offered by Allia, a national charity that issues Bonds to raise money for social causes. Of every £1,000 you invest in the Bond, around £800 is loaned at a commercial rate to a registered provider of social housing to develop affordable housing.

The provider has a Aa3 rating from Moody's. The remaining £200 or so after Allia's costs is invested in social causes e.g. Microfinance which traditionally pays about a 2% return.

After 5 years, the housing provider repays the loan with interest and investors receive their money back in full.

Moreover, investors can receive a return on their social cause investment too.''

Some KIID summary that eh??

I simply can't wait to run this opportunity by my clients, they'll be running from the hills with their cheque books, wetting themselves to get invested

---------

Take a look at the the other Product...... final line, ''returns to investors will be met by..... the public sector.''..

Sorry FSA, but it smacks of yet more QUANGO's R ' Us

report this

Usually found sitting on the fence

Feb 08, 2013 at 11:31

Thnk you Hugh, I am now smiling at the thought that some investors will be paying for social housing to be built in their back yard, while campaigning to prevent the social housing being erected... Happy days, the circle of life, so to speak!

report this

Hugh Jars

Feb 08, 2013 at 12:02

@ UFSOTF

Those same clients will end up applying for the social housing, once they've lost their 'ard-earned' by investing in the Charitable bond...which goes T's-Up cos the 'Developers ' went under....

Sheds a new light on Investment Risk...... I can't believe the FSA are so niaive as to go near it, ... (unless of course there's seats up for grabs in the Quango's lifeboat, as the FSA sign is taken down at canary wharf soon)

report this

Mr Man

Feb 08, 2013 at 12:19

Here they come a bitching. Great Headline for Money mail "Spanked UK IFA''s throwing their toys out of the pram.!! LOL

@ Duncan Carter 2. Sorry I was out adding real value to clients when you responded. which quite frankly is something you will never do through fear of retrospective retribution from your master ( you know the regulator who has his hand up your ar...)

@ Usually sitting on the fence. "Gives a certain feeling of dealing with someone who has achieved certain qualifications and recognition as suitable... What a poor memory you have of our previous little chats. Remember that greedy IFA who took £175 K commission. A bed fellow of yours whether you like it or not.! .

@ Kate Brookes Just wake up and smell the coffee. Take a step back, get a helicopter view. A UK IFA can no longer offer any value for money. Vanilla with everything.

The Daily Mail (Money Mail - Jeff Prestridge ) and co cooked the IFA fat goose . Well done to them all. LOL

report this

Ian Lees

Feb 08, 2013 at 12:39

Hertzlich und Wilkommen back to Mr Man - or should that be Half a Man, half a Brain - or just . . . . . . . Half Wit ?

report this

Usually found sitting on the fence

Feb 08, 2013 at 12:48

@ Mr Man - Alas I fear your memory is not as great as your claims of adding value. I remember well, I asked that you report the IFA and I am well aware that in any profession, walk of life and in society at large there are the bad, as well as the good. You seem also to forget that I am not the bed fellow of any advisor, as I am not amongst those that offer advice.

I am always open to being educated, so perhaps you would be so kind as to share some of your wisdom with me. Who are you regulated by and what current investment schemes are ones to look out for? Please only the ones that the Vanilla loving IFAs are too afraid to touch? I look forward to your suggestions.

report this

Mr Man

Feb 08, 2013 at 13:33

@Ian Lees. I do not recall ever being personally rude to anybody who posts on this thread. I have clearly hit you verbally where it hurts and you have no other recourse left but rudeness, thereby proving that the only half wit is you.

UK IFA's it seems just do not know what is going on. You are finished. You have been and continue to be "regulated" out of a job. This is the way the FSA have chosen rather than campaign for an outright ban. Your whole client existence is more what you cannot advise on rather than what you can. This thread is all abut that. Another investment vehicle that is apparently too risky for most people to understand. You will once again be left in no doubt that you should not advise clients to invest in. Every innovative present or future investment you cannot advise on. You are nothing more than a vanilla product jockey. You cannot even advise on "tax avoidance " any more.

"Half brain". Intellectually I've got you beat buddy.

report this

Kate Brookes

Feb 08, 2013 at 14:03

Can we play nicely please boys ? ...I was quite interested in this debate about Social investing until Mr Man chipped in trying to start another bun fight. Now it's just boring, I'm off. Email comments box unticked bye......

report this

Mr Man

Feb 08, 2013 at 14:11

@Kate. Bye Bye. If you do come back. Concentrate on what you can advise on and do not get bogged down on what you cannot. You will only get all frustrated and cross, bless.

report this

Usually found sitting on the fence

Feb 08, 2013 at 14:29

@ Mr Man - I am still waiting for some information. As someone that likes to know things, it would be good to have some teachings. What non-vanilla investments are the new must have financial accessory? I mean the ones that add value!

report this

Hugh Jars

Feb 08, 2013 at 14:34

I'm with Kate Brookes,

box unticked and off to eat more Vanilla with my clients who also love the taste of vanilla, particulalry when it represents consistent annual return of only inflation plus 5 or 6%.

Some of them have previously sampled the taste of shite, when sexy offshore 'No-Brainers ' arranged by maverick New Age IFA's have gone sour.

Seems to me that Mr Man is on a crusade to annoy as many people as possible, which stems from a deep rooted self-loathing resulting from one of two things

a) Having a very small penis,

b) Being interfered with by a close male relative as a youngster.

or it could be both :- ))

report this

Ian Lees

Feb 08, 2013 at 16:32

@ half a "mist" . . . er . . . man . . I was giving you the benefit of the doubt by suggesting you had up to " half "a Brain ? or up to "half" a wit . . . . thinking you had half of any of these . . . clearly, . . .I was wrong ! Intellectually you could not " beat " your way out of a paper bag ", and the closest your challenges comes to " Jockeys ", ( Vanilla or otherwise ) . . . . is in the male undewear department . . . not the " gentlemans " . . . . obviously .

To avoid any confusion on your part . . . I am not . .. . . . your " buddy ", boy yo !.

report this

Tracy Seed

Mar 04, 2013 at 14:18

I dont know much about this, but I do know of lots of fantastic programmes that make a measurable difference to chidren and families reduce crime, poverty, abuse etc... meaurable outcomes if anyone is eer interested let me know...I'd be happy to be introduce brokers to providers...

Tracy

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Opportunities emerge as production moves back home


As the UK coalition government strives to rebalance the national economy, so called 'reshoring' looks set to play an increasingly important role in economic recovery.

Today's top headlines

A spotlight on Alastair Mundy


Alastair Mundy met Citywire's Daniel Grote at the London Stock Exchange Studios for a detailed interview about the Investec Cautious Managed fund.


Read more...

SFO to pay out £3 million to Tchenguiz

by Michelle Abrego on Jul 25, 2014 at 17:26

Sorry, this link is not
quite ready yet