RIAs making investments to attract socially responsible clients

Investors seeking to align values and money turn out to be great advisory customers

Jun 15, 2016 @ 9:13 am

By Liz Skinner

+ Zoom

Socially responsible investors are the type of clients financial advisers should be clamoring for, and some large independent advisory firms are making the investments to attract them.

People who want to put their money to work in companies with practices and policies that are environmentally friendly and socially responsible tend to be loyal and appreciative — and stick around for a long time, said John Streur, chief executive of Calvert Investments, which sold its first social investment fund in 1982.   

“These are the best clients in the world because they have made an investment decision for performance and also for another set of reasons,” he said. “The socially responsible investor is not just focused on day-to-day performance.”

Most wirehouses have been building out platforms to accommodate socially responsible investing for about the past five years, and now many large independent advisory firms also are showing interest. They're hiring dedicated professionals, creating investment platforms, developing specific reporting tools and holding client education events to attract those interested in impact strategies — something women and millennials particularly prioritize.

Wetherby Asset Management, for instance, hired its first director of impact investing in September and recently began putting out a quarterly update to tell clients about developments in the impact investing field.

(More: Merrill Lynch adds social impact portfolios to platform)

Justina Lai, director of impact investing at Wetherby, said the firm sees its dedication to SRI as providing value for clients, who increasingly have sought to align their investments with their values.

“We want to meet their needs, and this is an area of their interest and need,” she said.

About 20% of Wetherby's clients are invested in SRI, with 10% to 15% of the firm's $4 billion in client assets invested in the space.

Matthew Weatherley-White, managing director at The CAPROCK Group, said socially responsible investing is the single most important initiative at his firm. CAPROCK Group is a multifamily office with about $3 billion in client assets, a third of which has an impact mandate.

Mr. Weatherley-White helps clients invest in SRI across their portfolio.

“They are dedicated to the notion of pursuing impact in the full array of assets across the balance sheet,” he said.

That means incorporating real estate, public fixed income, private debt and other investments based on their environmental, social and governance performance, he said.

Impact investing is still a developing field, and Mr. Weatherly-White said he believes that is what prevents more advisers from jumping into it even as clients increasingly show interest.

“It's a discipline that's evolving, and some advisers don't want to say to clients, 'Let's explore this together,'” he said.

Only about 39% of advisers said they are offering impact investing choices to clients, according to a First Affirmative Financial Network survey of 508 financial professionals in September and October 2015.

Leon LaBrecque, managing partner at LJPR Financial Advisors, hasn't always been a big believer in socially conscious investing because he found the investments to have high fees and lower performance.

However, he said interest today “seems to be gearing up,” and he is more keen on impact investing. He's actively looking for such investments that measure returns both by the societal and financial outcomes they create.

(More: Why it's time to believe the hype behind ESG investing )

Abacus Wealth Partners has invested in SRI, creating a platform last year called Align to help smaller advisers integrate impact investing with traditional advising.

Financial adviser Jennifer Kenning, managing director of Align, said SRI investors are committed to making a difference and are engaged in the financial planning process.

“They also are willing to listen, learn, engage and empower the next generation,” she said.

Steve Schueth, president of First Affirmative Financial Network, agrees that socially responsible investors make great advisory clients, because they are “big picture thinkers and are long-term oriented in their investing approach.”

(More: Socially responsible investing is coming of age)

According to the latest data from The Forum for Sustainable and Responsible Investment, nearly $7 trillion is invested in ESG strategies in the U.S., up markedly from $4.3 trillion in 2014, and $202 billion in 2007.


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