Penn-Tracy suggests several ways advisors can get started having these conversations: First, get a good idea of what matters to your clients. Then match the portfolio strategy with their personal values. Walk them through each part of the portfolio, explaining how each investment reflects their values. During regular client meetings, share stories that let them know what different investments are doing on their behalf—successes as well as failures.
For example, Penn-Tracy says her clients respond very positively when she tells them how As You Sow, non-profit leader in shareholder advocacy, filed resolutions with Abbott Laboratories from 2013 to 2015 requesting that the company introduce non-GMO Similac infant formula. Shortly after the 2015 annual meeting, Abbott introduced the first non-GMO Similac products; in the years since, it has become a large and very successful product line. These kinds of stories also powerfully illustrate how shareholder activism works and keep clients engaged in the big picture. “This process makes me a better investment advisor,” shares Penn-Tracy, “because I’m also managing my own emotions and behavior.”
One of the biggest benefits for advisors is that clients stick with you during periods of high volatility. “My clients listen to me,” explains Penn-Tracy, “because I’m relating at that deeper level. So, of course we rebalance portfolios based on these fluctuations and other risk factors happening in the market, but I have relationships that let us get through these cycles together rather than the market breaching the relationship.”
“I put it this way to my clients,” concludes Penn-Tracy. “If we care about what we’re investing in and about making a difference in the world, whether that’s renewable energy, gender equity, clean water or any of the issues sustainable and impact investing focuses on, we’re more able to ride the waves up and down in the market without becoming too reactive. And it’s ironic that the less we focus on financial returns, the better decisions we make and the better returns we get.”
Paul Ellis founded Paul Ellis Consulting to work with financial advisors who want to integrate sustainable and impact investment strategies for their clients.