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City of London Corporation Latest research from Boston Consulting Group predicts that, from a social investment market size of ÂŁ165m in 2010, the demand for social investment will increase to closer to ÂŁ0.75bn in the next three years. The challenge is to make investors ready and able to provide the types of finance that generates lasting benefits to society, as well as acceptable financial returns. The City of London is working to cement its position as a global centre for social investment. Several leading

social investors are already based here and innovative social instruments have been created here. The City of London Corporation is supporting projects that will develop the market infrastructure, as well as managing our own ÂŁ20million social investment fund. We encourage you to use your professional expertise to help develop, manage and distribute products and services which embed social benefit into the investment decisions of your organisations and of your clients.

Mark Boleat / Policy Chairman, City of London


Research tells us that 55% of individuals with more than ÂŁ100,000 to invest would like their money to do good as well as provide a return.

Welcome I believe we are faced with an amazing opportunity. As a profession, our history has not yet been written. We now have the opportunity to build a true legacy of holistic planning; one which will involve the growing number of clients who wish to make a positive financial contribution to society, being enabled to do so by channeling a part of their wealth into social investment, ‘the third pot’. As with every opportunity, however, there comes a challenge! Advisers have told us that there is a need for education; a need to understand

the language, the terminology and the definitions within this nascent sector. In order to bring social investment into the mainstream of financial advice these needs must be addressed. Hence the Social Investment Academy! The inspiration for this initiative has sprung from the desire of Worthstone, and David Ingram of Aim Two Three, to see this new sector reach maturity, and the clear need stated by wealth advisers for the resourcing they require to play their part.

Gavin Francis / Founder and Director, Worthstone

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Pot

Investment

SOCIAL Investment

Philanthropy

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Goal

Definition

The role of the “traditional� investment portfolio is to ensure life goals are achieved – sufficient income to meet needs in retirement, family education costs etc.

A binary decision process, which measures performance by focussing on the financial return commensurate with an acceptable level of risk.

Social Investment enables social goals to be achieved via engagement with projects which feature recognisably commercial elements: the funds are potentially recyclable

A strategic approach to targetting investement which produces a defined and measurable positive social outcome as well as a return of your invested capital plus a potential yeild.

Philanthropy enables giving goals to be achieved through outright gifts to projects for which the donor has identified a clear passion.

Giving money away with no prospect of the capital ever being returned and therefore cannot be re-used to generate any further connection with this capital.


Summary of Key messages Social impact investing is a way of investing into a company or fund to produce a defined, positive social outcome with the intention of a return of capital and the possibility of a yield over and above the principle.

Social impact investing (SII) is a groundbreaking entry into the financial services arena that matches the narrative of our times with significant potential to help generate a strong economic recovery and the prospects of long term growth.

There is strong research evidence that a statistically significant proportion of high net worth individuals will consider SII favourably when it is professionally presented to them.

SII has strong governmental backing, with cross party support, and will achieve broad media coverage. There are already strong and successful products available so the sector will grow rapidly if it is included in client recommendations.

Top level independent advisors and planners will want to fulfil their obligations following RDR and offer a full range of options. Including SII will demonstrate both broad industry knowledge and the desire to meet all the expectations of their high net worth clients.

Worthstone is an impartial independent broker of research, policy-maker influence and information which offers provider neutral analysis and assessment of SII products to support the due-diligence process of wealth advisors.

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Motivations for social investment Individuals with an ‘active interest’ in being social investors T – Trigger B – Barrier

ORDER OF IMPORTANCE

£100k+ asset group

1

Engagement with the Social Enterprise/Charity

T

2

Early adopter

T

3

Recycling social investment pot is positive

T

4

Produce evidence of social outcomes

T/B

5

Economic environment leads to needs for social enterprise

T

6

Social investment encourages business-like behaviour

T

7

Tax incentives could make a real difference

T/B

Ipsos MORI / Nesta (2011) Investing for the good of society

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Why get involved in Social Investment We believe there are significant opportunities to provide advice to clients in a fast growing SII market. Increased relational capital built by creating shared value will be the most significant generator of growth amongst wealth advice businesses. Social impact investing can inspire a full ranging discussion with established clients and create a further relationshipbuilding opportunity. Differentiation: A skilled advisor must show coverage of all available investment options. Showing understanding of SII demonstrates expertise and measurably extends the advisor’s range against the competition. Grows relationship capital and building trust and confidence: The successful post RDR advisor will be identifiably client-need focused. This means both being aware of a shift in investor thinking towards investments with a beneficial outcome and also having a solution to offer.

Confluence of factors influencing client demand: There are three important trends that will influence the investor in favour of SII in 2013. 1) Popular sentiment about financial institutions has become increasingly negative. 2) Unmet social needs are increasingly visible and concerning whilst public sector finance is severely limited. 3) Percentage returns are low so that most middlerange investors feel that pure philanthropy diminishes their investment pool, putting their own needs at risk. Client goals and aspirations leading to the third pot: Financial advisors should expect their smarter clients to be aware and to ask them “What about social impact investment? Should I be looking at this?” Some may even say, “Should I now have three allocation pots rather than just the traditional two pots of investment and philanthropy?” Be prepared – lead the field.

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5 steps to investor engagement Identify clients that have social goals

Discovery process questionaire

2

Identify specific area of social need they would like to address.

Discovery process questionaire

3

Identify to what extent your client is willing to sacrifice some financial return for acheiving these ends.

Discovery process questionaire

4

Access information on the available social impact funds

Independent research assesments on all products

5

Establish suitability to investor

1

6

Tools to assist you

(including capital adequacy, attitude to risk, capacity for loss, need for liquidity and all other requirements specific to the product wrapper)

Over to you!


AIM TWO THREE

www.aimtwothree.com

AIM TWO THREE is a new sort of support provider working with advisory firms, product manufacturers and fund management groups in a range of areas including compliance, investment propositions, business consultancy, paraplanning services and product design.

Worthstone

We are keen supporters of the emergent sector of social impact investment and the opportunities which it presents to work with advisers to help them to help their clients to use some of their wealth to promote positive social outcomes for the good of society in general.

www.worthstone.co.uk

WORTHSTONE is a hub of independent, impartial specialist expertise, providing an interface for the advisers, planners, policymakers, wealth managers and social investment product providers who share Worthstone’s vision for seeing client money invested for social good. For the wealth advice community we aim to deliver a robust process that ticks

consistent boxes and provides the tools the adviser or planner requires to offer advice in this dicrete area. A straightforward process focused exclusively on social impact investment that delivers: • independent analysis, • an objective assessment of products • a support service for the social impact investment advice process

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Our sponsors “Big Society Capital are delighted to be able to support the first meeting of Worthstone’s Social Investment Academy. Momentum is growing in the social investment market, with particular interest from private investors. It is vital for financial advisors to get engaged at this stage of the market’s development” Nick O’Donohoe / CEO at Big Society Capital

“CCLA invests money for more charities than any other fund manager in the UK. We are owned by our charity and public sector clients, providing a unique focus for an investment management company. As pioneers of ethical and responsible investment, we have worked with others to push forward a positive agenda for change over many decades. We have experience of social investment transforming the lives of individuals and communities, but much needs to happen if it is to grow beyond a ‘cottage industry’. The launch of the Social Investment Academy is one important step towards achieving a greater awareness of this emerging market opportunity.” Andrew Robinson / Director of Market Development at CCLA

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With thanks There are so many people to thank for making this event happen, from the sponsors and CII and IFP for your support and accrediting this event for CPD, to the financial advisers and planners and wealth managers and all the team involved on the journey. To you all our sincere thanks: this is just the beginning, we hope we can all continue to walk alongside each other, persevering and focused on the goal of making a difference for the benefit of all.

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“There is growing interest in Britain’s social investment model around the world,…So I want to use our G8 presidency to push this agenda forward. We will work with other G8 nations to grow the social investment market and increase investment, allowing the best social innovations to spread and help tackle our shared social and economic challenges.” Rt. Hon David Cameron / Prime Minister

Published by Worthstone Limited 2013 AGF House, 3-5 Rickmansworth Road, Watford, WD18 0GX www.worthstone.co.uk

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