As impact investing continues to increase in popularity with clients, why aren’t more RIAs offering it?

Before we go further, a quick note about language.  I use the term impact investing broadly to describe SRI, ESG, sustainable and impact investing. If you want a quick overview on terminology, I've got you covered here.

Clients want impact investing options. Women want it. Millennials want it.  Even investors aged 65+ are interested. I've seen this survey data reflected anecdotally while helping RIAs add impact investing to their practices. The financial advisors and RIA executives I speak with want to meet the increasingly frequent requests of their clients and prospects who want their money working in line with their values and interests. Many RIAs and advisors find themselves interested in impact investing, but encounter hurdles in moving from interest to adoption. Here are the most common four hurdles I see, and how to address them.

Hurdle 1: I'm not sure what counts as impact or ESG. How do I know which products are actually impactful?

Solution: Take time to learn the details, just as you would with any other investment philosophy.  USSIF offers a course to learn the basics. Or attend the SRI Conference, SOCAP or another impact-focused event where you can immerse yourself in the field for a quick deep-dive. Finding appropriate and impactful investments that match your firm's philosophy will be easier when you know what to look for.

Hurdle 2: How do I add this in a way that complements my existing practice?

The most challenging hurdle to overcome is where portfolio construction meets business operations.  RIAs and advisors that are interested in impact investing want to add it in a way that augments their existing business, and doesn't take away from it. 

Solution: Create an offering similar in structure to your current business.

If your firm believes in index investing, and you have been explaining the importance of indexing to your clients for many years, you don't want to change your tune to accommodate adding an impact strategy.  The same holds true for value shops. If you've been imparting the importance of active management and value investing, you should continue to do that. Fortunately, there are enough impact, ESG and SRI products in the marketplace to cover a wide variety of investing styles.

Another key to adoption success is to use the systems that you already have, so that you don't have to learn new technology or investment vehicles to add new client offerings. For example, if you've been constructing portfolios of mutual funds at Schwab, and doing portfolio reporting through Orion, you'll want to continue to do that.

First « 1 2 » Next