Transferring to an Ethical Portfolio
Have you been thinking about moving your money to more ethical investments? Here's how we can help you.
The First Step
Building an ethical investment is like starting any relationship with a financial planner. Our ethical financial planners will look at your personal circumstances. This will involve completing a fact finder to ascertain your financial goals, aspirations, risk profile and also assessing your current portfolio.
This will give your financial adviser a sense of where you are currently and where you want to be in the future.
The major difference will be that as part of our fact finding process you will complete an ethical investment questionnaire, to find out the issues or companies that you want to support and avoid.
Statement of Advice
Having got all the relevant information, your ethical financial planner will then ascertain which companies or funds comply with your ethical concerns and which ones contravene your ethics.
Many large investment funds and superannuations will track the All Ordinaries Index and so often they will have larger miners, banks and industrial shares that might not be the most environmentally friendly or socially responsible.
As part of a Statement of Advice your ethical financial planner will advise you of the ‘unethical’ shares or funds and make recommendations for change.
This does not mean that all large companies are excluded from your ethical portfolio, in fact many shares in the ASX 300 would appear in many of Ethical Investment Advisers clients’ portfolios. Many larger institutions have realised the merits of being environmentally and socially conscious. Looking after staff, customers and the environment makes good business sense and in many instances saves companies money.
Sometimes transferring out of assets isn’t straightforward.
Capital Gains Tax (CGT)
Your ethical financial adviser would need to have a look at your current CGT situation:
- To see if you are carrying forward losses that might offset future gains.
- Look at other ways to mitigate tax, maybe selling some assets in profit and other in loss to get a neutral tax position
- Look at using superannuation contributions to help lower taxable income and therefore lower CGT.
- Sell assets across different tax years to spread the gain and or defer it to a future year.
Frozen Assets
In the Global Financial Crisis (GFC) many funds were frozen to redemptions and it might be that they cannot be sold out of a portfolio. Your ethical financial planner can keep a watching brief on the funds/shares and advise you when the assets can be finally sold or transferred.
Specific Assets
Sometime there might be investments that are fundamental to an investment portfolio and an ethical option isn’t available. In these cases your ethical financial adviser would talk to you about options. It might be a situation where you decide whether to go with your financial needs over your ethical concerns.
Research
Research is important to all advisers and it is especially true for your ethical investment adviser. Because in addition to financial research your adviser will have an ethical overlay, that looks at companies in more depth. By using an ethical financial planner you will have access to that additional information.
Graduated Approach
Sometimes it isn’t a good time to sell a share (ie. maybe close to paying a franked dividend, or the price is unusually low) so part of an ethical plan is to work through the issues and everything doesn’t have to happen at once.
Ongoing Advice
Because taxes, financial legislation, investments are constantly changing having your ethical financial planner review your portfolio makes a lot of sense. Your adviser can keep you abreast of new rules, explain new investments and things change all the time.
Let's get started!
To move your money to a more ethical portfolio, contact us to get started.