Asset Allocation, Green Investing Evolving

The last time we spoke with Bill Crager, president of Chicago-based Envestnet Asset Management, which provides such services as online proposal generators and Web-based reporting tools for financial institutions and independent advisors with clients at all asset levels, it was early 2007 and he was focused on the aging population of the country, the rise of the independent advisor, and the growing trend of outsourcing among these advisors. With the arrival of 2008, these developments continue to be “quite healthy,” according to Crager, and are transforming into a new set of trends for this year.

“A prevalent theme in 2008 is the evolution of asset allocation,” Crager says, pointing out that the older investor who wants to protect capital and avoid volatility will drive that evolution. “Everyone uses an asset allocation with the usual stocks, bonds, and cash,” notes Crager. “I think what’s going to happen is that as the desire to protect assets becomes more of a priority [for retirees], asset allocation will begin to evolve with some nontraditional asset classes, such as alternative investments or a structured investment note.” Crager believes there will be some challenges when it comes to increasing the popularity of alternative investments, primarily educational ones. “Any investor hearing this for the first time may not understand the investment solution–it’s not as intuitive to them as a mutual fund or shares of Intel,” he explains. Envestnet’s solution to this is aiding advisors as they distill the complexities into an understandable story for the investor that tells the correlation between nontraditional assets classes and traditional asset classes and how they balance each other out.

A second development among aging investors is one of environmental concern. “We clearly see a trend, especially in the ultra-wealthy and high-net-worth category, but also in the affluent category, where investors are seeking out opportunities to invest according to their risk tolerance but doing it in a way that’s not blind to any environmental or social cause,” Crager explains. He credits the newly retired generation with boosting awareness of green investing and the notion of sustainability, calling them “a more socially conscious generation than those that have approached retirement in the past. When they invest dollars, they want to know what the companies they are investing in are doing and how they are operating their facilities–are they big-time polluters or are they doing something beneficial for the environment?” Crager believes that over the next ten years, the trend will become even more mainstream.