Financial advisers don't need to worry about defining socially responsible investing as much as they need to focus on making sure they can describe the concept overall, help clients with investment choices, and why clients might be interested, experts in impact investing said.
"Get used to talking about the idea with clients," said Cameron Barsness, principal with Kutscher Benner Barsness & Stevens, and a featured speaker at the
InvestmentNews Women Adviser Summit in San Francisco on Oct. 23. "The future of your practice is the women and the next generation. If you are not having this conversation with your clients, you risk not having a future with them."
Clients — especially women and the next generation — increasingly ask their advisers about selecting stocks and other investments based on environmental, social and governance issues. In fact, women and millennials are responsible for the doubling of
ESG assets to $8.1 trillion worldwide from 2014-17, and that trend is expected to continue.
(More: 3 ways advisers should prepare for ESG conversations with 401(k) clients)
Impact investing seeks to support the causes that matter to investors, but not through making charitable donations. Socially responsible investment strategies aim to generate returns.
"Explain that you're looking for a return on investments in companies that will possibly be better because you've looked at these other [ESG] factors that are going to affect their performance and effect the business culture that they are in," Ms. Barsness told the 150 mostly female advisers at the conference.
Advisers also need to be able to effectively "look under the hood," of socially responsible investments as they would with any investment, said Sonya Dreizler, an impact investing consultant to financial services firms, and moderator of the panel.
For example, if a mutual fund is called "green," the adviser still needs to ensure the holdings and investment philosophy match what the client is looking for, she said.
All the panelists mentioned that educating clients about impact investing means having to bust some myths.
"One persistent myth is that you have to put up with inferior returns, and that is not the case," said Claire Veuthey, director of ESG & impact at OpenInvest.
(Slideshow: 10 top-performing ESG funds)
Additionally, many people expect only the more liberal clients to be interested in investments that include a social purpose. But Kim Wright-Violich, managing partner at Tideline, an impact investing consulting firm, said that's not true.
"Impact investing shouldn't be political," she said. "When we talk about shareholder activism, it's not just for clients from one particular place on the spectrum. There's equal interest in this from those backing the conservative, small-government side."
At Ms. Barsness' firm, advisers send a questionnaire to all clients each year, asking questions about their thoughts on ESG issues. Their answers are a great way to start a conversation, she said.
Her firm wants to make sure its professionals are engaging clients on the topic before clients bring it up to them, or worse, before their clients' children ask their parents about it and are told the adviser hasn't ever mentioned it.
At the daylong meeting, the fourth
InvestmentNews
Women Adviser Summit in 2018, advisers also picked up other tips from experts, such as ways to support client
philanthropic efforts to boost business.
Women advisers also were encouraged to take a more proactive approach to marketing, technology, outsourcing and the positioning of their services.
