ImpactAlpha, April 23 – Financial advisors are transforming themselves into “agents of impact” in order to deepen their relationships with existing clients, build their book of business – or stay in business at all.
“This is a retention and recruitment conversation,” Morgan Stanley’s Noel Pacarro Brown said on ImpactAlpha’s Agents of Impact Call No. 8 last week. “There is no one type of client to have this conversation with. Everyone is wanting this conversation.”
Sustainable and impact investing is no longer just a trend among women and millennials, she said. Financial advisors need to engage all of their clients, particularly as wealth shifts between generations and toward algorithmic investment platforms.
Nearly 200 ImpactAlpha subscribers signed up for The Call, which was specifically aimed at helping advisors eager to start those conversations. Co-author William Burckart introduced a new guide, “Fundamentals of Sustainable Investment,” that he said is meant to “get into the weeds,” starting with that first client conversation. Burckart, who heads The Investment Integration Project, developed the guide with the Money Management Institute to walk financial advisors through the process of building a sustainable investing practice.
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Taking initiative
Advisors need to be able to talk both about values-alignment as well as potential financial returns from sustainable investments, Burckart said.. Clients who may primarily be motivated by financial performance also care about values-based investing, and vice versa.
“Clients [can be] motivated by values or performance, but all things ultimately filter into the core approaches of sustainable investing,” he said. “It is useful to financial advisors to be open to facilitating the conversation either way, or with a mixture of both.”
“Half of investors want their advisors to speak with them about ESG,” noted State Street’s Brie Williams, referencing the subset of sustainable investing that focuses on screening for positive environmental, social and governance factors. Financial advisors can’t wait for clients to ask; many don’t know what products and tools are available to them.
“What we see in the data is that many advisors aren’t proactive about speaking with their clients about it.”
Agitating for impact
Taking this kind of proactive approach isn’t normal operating procedure for most financial advisors, particularly in what is a fairly new field of investing. “Wealth Managers skate to where the puck was, rather than where it is going,” commented Mark Sloss of Regenerative Investment Strategies, a sustainable and impact investing advisory firm. Some financial advisors get pushback from their home offices, which are responsible for curating the investment products financial advisors can recommend to their clients.
Forward-thinking teams have been consistently “hammering away at the home office” and are helping to move the needle for the rest of the industry, Sloss added. Clients are eager to apply the same conscious considerations that “sent them to Whole Foods or to Patagonia” to their financial portfolio. “There is recognition that this isn’t just ‘a thing’ but a megatrend,” Sloss said.
Williams runs the team at State Street committed to helping financial advisors grow. She says part of her team’s role in “arming financial advisors for change” is helping them agitate internally for sustainable investing resources.
“Home offices that aren’t responding will find that the pressure and chorus from financial advisors will get louder,” Burckart agreed. “You are operating at your own risk if you’re a home office and not providing those resources.”
Early movers, like Pacarro Brown’s Conscious Wealth Management group at Morgan Stanley, often are happy to help guide financial advisors who want to incorporate sustainable investing theme into their own practices. Her key piece of advice: listen more, talk less.
“The mechanics of impact investing and ESG are all tools that can be learned,” Pararro Brown said. “But how you approach clients and take discovery to a deeper level—you’re talking about values that may span across generations. You have to be interested and engaged.”
Additional resources:
- “How to start the conversation, and other sustainable investing tips for financial advisors,” ImpactAlpha.
- “Fundamentals of Sustainable Investment: A guide for financial advisors,” Money Management Institute and The Investment Integration Project.
- “Sustainable Signals,” Morgan Stanley Institute for Sustainable Investing.
- State Street’s ESG-matching “Values Discovery Tool.“
- MMI/Morningstar Sustainable Investing Initiative, educational resources, workshops, forums and thought leadership.
