3. ESG Investing Will Power Tighter, Friendlier Advisor-Client Relationships
Like doctors who made house calls in days of yore, investment advisors used to enjoy very tight relationships with their clients: frequent in-person and telephone communications underpinned a relationship akin to close friends. In the last 20 years, however, technology intervened in a big way. Actively managed funds were commoditized into passively managed index funds and exchange-traded funds. Algorithms, A.I. and cheap data have effectively replaced the role of advisors, creating tremendous price pressure and driving advisor fees to near zero. Automation de-coupled the advisor from the client in many ways: what used to be close friendships evolved to purely transactional relationships: “Markets are destabilizing. I recommend you shift X to Y. Permission to proceed?”
The arrival and momentum of ESG investing allows advisors to reclaim tighter relationships with their customers. It invites a conversation about clients’ very personal values. Ironically, technology like DCI now enables improved advisor-client relationships rather than undermining them. DCI empowers advisor and client to work closely together to steer client assets in alignment with their values. It opens the door for advisors to elevate their conversations with clients to a more personal and meaningful level while providing clients a better sense of agency over how their resources will be allocated to match their personal views. It paves the way for the rebirth of the “best friends” advisor-client relationship at a time when it’s needed more than ever.
Next year promises turbulent times in society, politics and the financial markets. It’s a good time to remember our values, invest in them and remind ourselves: we’re all in this together.
Josh Levin is chief strategy officer and co-founder of OpenInvest, a registered investment advisor and public benefit corporation leveraging technology to provide a next-generation impact investing solution.