Three-quarters of investors want advisers to ask about responsible investing preferences — but too often the conversation is buried in a risk questionnaire or reduced to a tick-box. Under Consumer Duty, this isn’t good enough, say Elly Dowding and Lee Coates of ESG Accord
In this article, they argue that values-based discussions must stand alone, be handled meaningfully, and be properly documented. They set out practical steps advice firms can take to avoid sludge practices, reduce client vulnerability, and deliver better outcomes.
Conversations about sustainability and values in investing are no longer a “nice to have” – they are central to good advice, good outcomes, and compliance. Yet too often they are either avoided, squeezed awkwardly into a risk questionnaire, or turned into a tick-box exercise.
The FCA’s 2024 Financial Lives Survey underlined the scale of the issue: 76% of investors said they want to be asked whether they wish to invest responsibly when receiving advice or selecting a pension. That doesn’t mean three-quarters of clients will necessarily choose sustainable or ethical investments. But it does mean the majority want the opportunity to consider their options. In other words, clients want to be asked — and to decide for themselves.
The wrong questions in the wrong place
Advisers are used to a robust “know your client” process. But asking “Do you want ESG?” as part of an attitude-to-risk questionnaire is not fit for purpose. It conflates two issues and potentially risks leading clients towards unsuitable or problematic conclusions.
For example, some firms ask clients if they are willing to accept additional risk or lower returns to achieve environmental or social outcomes. This question is may be misleading: there is no evidence that investing sustainably inherently carries more risk or delivers weaker returns. Framing it that way may be viewed as nudging clients away from options that may suit them, and be considered a breach of Consumer Duty’s requirement for informed choice.
Similarly, asking whether clients want hard evidence of impact before they invest can drive them down narrow pathways where quantitative data exists (such as carbon metrics), while excluding other equally valid sustainability themes where measurement is more complex or qualitative. The question shapes the answer — and not in the client’s best interests.
What good practice looks like
The FCA has already highlighted better ways forward. In its Fact Sheet 21 on assessing client needs, it points to good practice questions such as:
- What are your political and ethical views when investing your money?
- What would you like to achieve from your investments?
These questions move beyond financial metrics to explore client values. Crucially, they are not asked within the standard fact find or risk questionnaire but as a separate, meaningful conversation.
This separation matters. Values and preferences are not a mechanical add-on to risk or capacity for loss. They are personal, emotional, and — in some cases — could be tied to protected characteristics such as religious belief. Getting them wrong can mean not just poor outcomes but actual client vulnerability.
Informing, not overwhelming
Of course, meaningful conversations require clients to know what their options are. Most clients don’t come to meetings asking for “conventional with ESG risk overlays” or “high-impact sustainability.” They come saying they want to invest. It’s up to advisers to make sure they understand the available pathways:
- Conventional investing
- ESG (risk-based) integration
- Sustainability strategies
- Ethical or responsible approaches
Providing a simple, client-friendly explainer in advance of a meeting gives clients time to reflect without pressure. It also reassures them that there is no “right” or “wrong” answer — only what aligns with their own preferences.
What firms should avoid is the opposite extreme: long, complex questionnaires that force clients to wade through every conceivable ethical screen before they can invest in line with their values. That risks becoming a sludge practice — an unnecessary barrier to good outcomes. A better approach is to offer choice: clients can either leave decisions to their adviser or investment manager within agreed parameters, or go deeper into detailed preference setting if they wish.
Why this matters for Consumer Duty
Consumer Duty overlays all advice processes, including sustainability. Advisers must act in good faith, avoid foreseeable harm, and enable clients to pursue their financial objectives — including where those objectives are values-based.
Failing to ask about values not only risks poor suitability but could actively create vulnerability. A client who later discovers their money was invested in ways that contradict their deeply held beliefs may experience distress or even anxiety. Conversely, clients motivated by climate concern or faith-based values may take higher risks than usual to achieve outcomes that matter to them. If those drivers are not identified at the outset, suitability can easily be compromised.
A call to action
So where, when and how should sustainability and values be discussed? Our view is clear:
- Where: Not buried in the fact find or risk questionnaire. A standalone conversation.
- When: At the beginning of the advice process, ideally supported by client-friendly materials in advance.
- How: By offering clear, simple pathways; making it easy for clients to express preferences; and documenting decisions carefully.
Asking clients about their values is not an optional extra. It is a core part of delivering good outcomes — and doing so meaningfully is vital for Consumer Duty compliance.
Our recommendation? Review your client journey. Check where, when and how you are creating space for these conversations. Are you opening doors — or unintentionally building barriers?
We invite you to listen to our latest podcast episode, where we explore all of these issues in more depth.
Elly Dowding and Lee Coates OBE are the directors at ESG Accord and the Accord Initiative which provides free-to-access education, resources, and compliance support to the financial advice sector on sustainability and Consumer Duty.
Main image: towfiqu-barbhuiya-Q69veNk1iJQ-unsplash
