• Advisors must find out whether the clients are interested in moving the needle faster and in a more comprehensive fashion using all of the tools and tactics at their disposal to advance their charitable intent.
• Advisors must determine, with the larger financial picture in hand, how much money—what portion of the assets or endowment—will be deployed using an impact investing strategy.
• Advisors must have a thorough understanding of the various ways in which impact investing and other tools can be put to work to advance clients’ philanthropy.
• Advisors should have up-to-date knowledge on resources that clients can explore as they are deliberating or deepening their impact investing strategies, including knowing the impact investment options that are available “in-house” or in partnership with other firms. A reputable resource for advisors and clients alike is Mission Investors Exchange (https://missioninvestors.org/about).
• Advisors should be able to anticipate the key questions that always come up around impact investing. Will clients compromise on returns and how do they evaluate the social or environmental impact they are making? This is still a work in progress—the field is comparatively young—though there are some evaluative rubrics and metrics that are being employed by philanthropists and their advisors.
• Advisors should be able to grow networks, ensuring that they have philanthropic experts in their circles of allied advisors that they can call upon as partners and resources for clients. Having peers who are working at the intersection of philanthropy and impact investing is important as well.
• Advisors must understand how a philanthropic strategy is created and the processes connected to implementing that strategy. Not surprisingly, both impact investment and philanthropic advisors follow very similar decision-making processes: identifying deals/investments or grants; conducting due diligence; and reviewing projected outcomes and evaluating follow-up reporting to ensure that their investments and their grant-making will achieve their clients’ financial, social or environmental impact.
• Advisors should ask questions or bring in philanthropic experts to contextualize the conversation with clients with charitable intent. It doesn’t matter whether they have formal vehicles such as a foundation, trust or donor-advised fund or are making gifts from their personal checkbook, or have no vehicle at all. But advisors should have “the conversation.” What are the clients’ values? What do they care about deeply? What is their charitable mission? Key elements of the philanthropic mission that can be aligned with impact investments include the populations served, the geographic focus reached and the social and environmental problems they are seeking to address.
• Advisors should choose the strategies that make the most sense for clients—the ones that best reflect clients’ appetite for financial risk, their beliefs about social change, the impact they are seeking to generate and how hands-on they want to be with their investments.
• Advisors should know how involved the next generations will be in the family philanthropy, and know whether they want those generations involved in the investment strategies as well. Be prepared for the strong probability that the next generation will want to understand how the charitable capital is invested.