Fee pressure. Growing the business. Hiring a great team. Managing (or turning away) small accounts.
The landscape of financial advice has changed dramatically in the last decade with the advent of technology solutions, proliferation of free financial advice, and growth of the millennial population to a third of the workforce. What can an advisor do to work this to his or her advantage?
Surveys have shown that millennials are more interested in socially responsible investing than previous generations. The same goes for women, and both groups are slated to inherit $30 trillion in wealth over the next three decades, according to PWC.
Yet, many advisors won’t even discuss SRI, preventing them from offering new wealth holders a valuable service. Why?
It is largely due to the persistent myth of SRI underperformance, combined with the distrust of financial services firms (common to the older millennials who came of age during the Great Recession and have different financial concerns).
However, if advisors can offer much-needed financial planning in a manner that resonates with the next generation, they may be able to lay the foundation for their business for decades to come.
You can uphold your fiduciary duty while investing clients responsibly as technology has helped change SRI options, alongside other investing strategies, by improving risk management, increasing customization, and lowering fees and account minimums. This keeps tracking error reasonable and allows for fees that reflect the nature of the investments made.
What about fees? Automation has forced transaction costs down so much that mutual funds and ETFs just add an unnecessary layer of fees. Using pre-packaged products rob advisors of the ability to harvest tax losses with satisfactory granularity — meaning money left on the table.
Fortunately, high demand has prompted new SRI supply so advisors aren’t stuck with the old guard, and can confidently choose products that best fit their clients’ needs from both a financial and values perspective.
[Editor’s Note: A recent US SIF study found there are more than 600 ESG-linked mutual funds today.]