FI Supervision 29: Advisors are not taking customers’ sustainability preferences into account

Six out of ten say that sustainability is important when saving money. Advisors at banks, investment firms and insurance intermediaries have an obligation to take into account consumers’ sustainability preferences. This does not always happen. Instead, many consumers currently face a risk of investing in products that do not correspond to their expectations when it comes to sustainability. This is the conclusion FI draws from its analysis, and we are now encouraging firms to devote a special focus to this topic.

There have been rules for a long time specifying that advisors must adapt their recommendations to consumers' risk preference when providing investment advice and portfolio management. In August 2022, new rules went into effect requiring advisors to also take consumers preferences into account in terms of saving sustainably. The rules were implemented to make it easier to save sustainably and help consumers understand that savings products can be sustainable to varying degrees.

Our analysis shows that firms have begun to implement the rules, but we would have expected them to have progressed further than they have. We see that firms need to be better at understanding the various features of savings products from a sustainability perspective and considering consumers' preferences to be able to suggest suitable products.

We also see a risk that firms are asking questions in a way that could steer consumers' preferences to match the firm's own products. It is therefore important for firms to always apply an impartial approach. Firms say themselves that it is often difficult to explain the sustainability concepts so consumers can understand them, and in some cases this leads consumers to opt out of providing preferences on sustainability.

"Consumers should have the option of making a decision on good grounds when they invest their money, and those who want to save sustainably should be able to do so, quite simply. Therefore, firms need to be better at describing in a simple manner what a sustainable investment means and helping the consumer with alternatives and practical examples," says Axel Engström, a senior supervisor at FI.

We encourage firms to continue to devote special focus to this area and prioritise compliance with the rules, which are now almost two years old.

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