Financial Planners Lead Adoption of Impact, SRI & ESG Strategies
As demand for impact investing increases, financial planning focused advisors are poised to make a smooth transition into the space. Some advisors shy away from having non-financial, values based conversations with clients, because they fear those conversations may be emotional and may not lead to a specific implementable output. Financial planners however, are used to having personal conversations with clients. In-depth conversations around values and goals are integral to comprehensive financial planning, and those advisors already have in their skillset the ability to have deep, meaningful, (sometimes emotional,) and personal conversations with clients. As most planners know, if you embrace, instead of fear emotional conversations, you'll find your relationships with clients grow stronger and more trusting. Of course, adding Impact, SRI, and ESG options to a practice requires learning about the investment options, and integrating the new offering into the practice, and forward thinking advisors are doing this now. Financial planner advisors will find themselves well positioned to meet the growing demand for impact investing.
Large Financial Services Institutions Play a Bigger Role
Intermediary financial services institutions and fintech companies that support advisors and RIAs (think Broker Dealers, large RIAs, large fund families, Fintech providers, and custodians) are well positioned to support advisors who are ready to bridge the gap between increasing ESG and SRI products, and increasing investor/ client demand for this type of investing. These large institutions often fund the research that shows growing consumer demand for impact investing, and want to be well positioned to capture that business via the advisors they support. I anticipate that over the next few years, financial services institutions and fintech firms will provide tools, training, and technology so that RIAs and advisors can capture the growing segment of investors looking to align their portfolios with their values.
More Impact, ESG & SRI Products
I predict that soon, every major fund family will have at least one offering labeled as ESG, Sustainable, Responsible, Green or some other variation. While more choice and competition is generally good, the quality of these impact themed investment products will vary greatly. Some large companies will acquire smaller managers with deep SRI and ESG experience. Others will just put a "sustainable" name on a fund that happens to exclude tobacco and weapons. Each investment management company interprets and markets the terms ESG, sustainable, and green differently. As with the existing SRI and ESG funds, advisors must either work with trusted managers, or “look under the hood” of each fund regularly to ensure that the holdings of each fund align with what the expectations of the client.