Putting sustainability at the heart of the financial system is the ambitious goal of the European Green Deal initiative and immediately the cause for changes in MiFID II regulation. The many modifications go beyond financial advice and impact all financial market participants, i.e., issuing companies, wealth managers, asset managers, and data providers.
How will it impact the investment industry?
How to seize this as a commercial opportunity?
How to future-proof your investment processes?

AMBITIOUS DEADLINE

Not meeting the ambitious deadline is not an option, although much uncertainty remains. Indeed, financial institutions are rushing to meet the deadline but will have to ready themselves to shift gear when regulators release additional information on level 2 guidelines. And it is not only the ESG questioning that needs to be ready but also the translation of their advice into portfolios and reporting.
Another challenge will be to have enough products in line with the ESG preferences of their clients from Day 1.
Regulatory changes are more often than not very welcome. Instead, it is just perceived as yet, another legal must-do. Moreover, it usually requires resources that could have been allocated to other projects.

COMMERCIAL OPPORTUNITY

We believe the upcoming EU sustainability regulation could prove a commercial opportunity for the investment industry. Indeed, sustainable investments have already proven to trigger the young to invest (more).
The ESG guidelines will only strengthen their resolve to invest by favoring sustainable businesses. The investment process/product link has to be clear and straightforward enough so that the young see they have a meaningful impact on companies and society.
To traditional investors, the new regulation might—a bit counterintuitively—have even a more significant impact. For example, some clients might turn to less complex execution-only investment processes. In contrast, others might not fully grasp the impact of their choices and end up with solutions that will not fit their expectations.

TECHNOLOGY TO SUCCEED

The challenge is not to discourage clients from getting through this new questioning and technical jargon. A clever approach will be, more than ever, the key to success. Clear communication, behavioral insights, and smart default settings will play an instrumental role in achieving high conversion rates.
There is no point in scaring clients and prospects with complicated processes or complexifying investing. People need to understand or relate to the products offered. The last thing we want is to disappoint a client after buying a product.
We have already proven that it is feasible to turn compliance into commercial performance using behavioral technology. When assessing the ESG preferences of a client, behavioral technology will undoubtedly help to digest the complexity of all the choices the clients need to make.
Technology will be essential at all stages of the chain, going from profiling to advice, portfolio matching, and reporting.

Curious how technology can help?
Click here and watch the recording of the Webinar that took place on April 21st at 14:00 CET. everyoneINVESTED, Objectway, and Synechron will provide some practical insights about implementing the new ESG MiFID II requirements into your processes.