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ESG Profiling: Hot Tips

By June 30, 2022No Comments

Turn ESG compliance into commercial performance

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 your advisory flows?
  • 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.


Avoid disappointing your client in case of unrealistic preferences with a clever onboarding journey without biasing your client.

Insights into behavioral finance become instrumental.


To meet the deadline, a lot of financial institutions have taken shortcuts. They are redirecting clients from a digital environment to branches, helpdesk, or worse: they use Sorry-we-can’t-service-you-flows. These shortcuts result in suboptimal and unhappy flows, both from the clients’ and banks’ perspectives.

Traditionally, superb services are designed, and then quickly, a MiFID sauce is thrown over it… But unfortunately, it’s the best formula to lose clients throughout the journey.Re-work will be needed to revert to a more efficient way of working. But in typical organizations, it’ll take a lot of workshops and throughput time to succeed.

Design tips:

  1. Make sure that what you write appeals to all types of clients you cater to, meaning both the believers and the non-believers.
  2. Start with why to get them hooked.
  3. Don’t forget to explain the choices, and above all, do not overdose.icon-leaf

Commercial opportunity

We believe the upcoming EU sustainability regulation could prove a commercial opportunity for the investment industry. Indeed, sustainable investments have already triggered the young to invest (more). The ESG guidelines will only strengthen their resolve to invest by favoring sustainable businesses. The investment process/product link must 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.

In an advisory context:

ESMA leaves a way out for the clients who don’t want to go into too much detail, especially in a live advisory context. Once the clients indicate they have specific preferences, they are not obliged to specify them. So, for example, they may have a good idea about which product types they allow in their investments but don’t have any minimum proportion preference.

If you want to give him this way out, you must explain the fallback scenario for those clients with apparently, after all, not-so-specific preferences. It might be hard to include this fallback option on your backend, but avoiding unhappy clients is worthwhile.


ESMA explicitly states that gathering sustainability preferences is preferably done through a self-assessment. The opposite, of what ESMA prescribes for investment objectives, i.e., risk appetite and investment horizon, … where self-assessment should be avoided.


Self-assessment doesn’t imply the use of boring questionnaires. Behavioral insights certainly can help in building converting journeys.

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.

Use Case:

Behavioral design of processes has led to whopping results like 80% conversion, 99% satisfaction rate, or additional 10% net sales in case of digital risk profiling. It’s only by behavioral service design thinking that compliance becomes an amplifier to performance.

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.


Two to five screens are enough to capture the sustainability preferences fully. Warning the clients up-front about the lack of offer in case of some extreme preferences is not allowed, yet back-to-square-one feedback loops should—and can—be avoided.

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, from profiling to advice, from portfolio matching to reporting.

See you after August 2nd 🙂

Eager to learn more?

Watch our webinar on the topic. Gosia Fortuna provides practical insights about implementing the new ESG MiFID II requirements into your processes.

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