“Across almost all asset classes, there are a sufficient number of high-quality opportunities so we will be able to meet clients’ needs and goals,” Lai says.
Millennials tend to be more risk averse, says Wetherby, because they haven’t had great experiences tied to taking market risk. But, she says, “Somehow they’re more willing to take risk in the impact space than in the traditional space because it’s sort of a twofer.” They also “reject out of hand the notion of a trade-off [of return for impact],” she says. “I think it’s because they’ve grown up in an age where they’ve seen it work.”

Wetherby Asset Management uses outside managers and strategies. It has used impact-oriented firms Parnassus Investments, Aperio Group, Walden Asset Management, Boston Common Asset Management and Generation Asset Management.

Wetherby and Lai note that there are many impact-related strategies in the public equity space. Private debt is also relatively easy to invest in, they say, because the instruments are straightforward and simple to understand. For example, their firm has used private notes from Root Capital, Calvert Foundation and MicroVest.

Younger wealthy investors tend to do limited investing in private equity and private real assets because it’s less likely to fit their illiquidity and risk budgets, says Lai.

Ellis, the consultant, says high-net-worth investors are asking for more impact products and driving their advisors to participate in venture capital, sustainable farming and opportunities in developing countries. As more dollars flow into sustainable investing strategies, he says product availability will continue to expand and become more accessible to people with less money to invest—including millennials.

One of the best ways to develop millennial clientele, he says, is through a retirement plan practice. That’s because millennials often say the only place they can currently afford to save money is in their retirement plans. As he sees it, this also lends itself well to getting more involved in the impact investing space.
Advisors can help millennials and other clients approach their employers about integrating more impact strategies into their retirement plan offerings. Those who coach clients about impact and accompany them to talk to employers about adding these strategies could also end up landing the employers’ personal investing and retirement plan business, says Ellis. He did this in his own practice.

He encourages advisors to work with established portfolio managers in the impact space, such as Pax World, Trillium Asset Management, Calvert Investments and Domini Social Investments. “They’ve researched it inside and out,” he says.

The key to success in impact investing, he says, is for advisors to build strong relationships with product companies. “This is not rocket science,” he says. “Advisors have done this in the traditional investing world already.”

Behind The Scenes
Millennials don’t just want to invest for impact—many are jumping at job opportunities for impact leadership roles. That doesn’t mean they’re qualified. According to the 2015 “Impact Investing Human Capital Survey” from executive search firm Korn Ferry, most candidates aren’t. But Korn Ferry and others are guiding employers on how to attract and retain impact-investing talent and expertise.

Meanwhile, more business schools are offering courses and hands-on training in impact investing and social enterprise.

Impact investing has been a natural fit for Avi Daman, the 28-year-old co-founder and CEO of New York City-based Edco, an online fund-raising platform that helps schools raise funds for student programs and equipment. He is a principal at Stax Development Corp., which launched Edco in 2014 and is the business-incubator affiliate of strategic consulting firm Stax Inc.

“I found that my business background, from my college education to my professional skill set, could really be put to use in my philanthropic pursuits and have an outsized impact,” says Daman, who has a degree in finance and has been involved in community efforts since high school.

What he likes—which resonates with many millennials—is that measuring impact and the bottom line drives much more effective allocation of resources and much more effective and targeted programs. “It’s also driving everyone around a core set of tangible, quantifiable goals,” he says, “instead of just a core mission, which is often a little more difficult to steer an entire ship towards.”

 

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