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April 30, 2019 at 01:00 PM
There’s been a generational shift in how investors think about their investments, and many advisors haven’t kept up. Younger investors, millennials and Generation Z, are more likely to want to build wealth in a sustainable way. A 2017 Morgan Stanley study found that 86% of millennials are interested in sustainable investing, and they’re twice as likely as older investors to seek out companies with good social or environmental policies.
Some advisors haven’t thought about how they can bridge this generation gap, and as a result, they can end up discouraging investors and even losing potential clients. But you don’t have to be an environmental, social and governance enthusiast to help people who are interested in sustainable investing.
Here are five ways to help the next generation of investors with sustainable investing:
1. Ask questions Investment advisors need to have a clear understanding of their clients’ goals and risk needs to help them invest, so start by asking questions like: How do you personally define sustainability? Are there certain companies you’re looking to avoid entirely? Are there particular issues you’re trying to support? What’s the goal of sustainable investing for you?
2. Focus on what you know best Sustainable investing follows many of the same rules as other kinds of investing. Sustainable investors still need to be diversified and think about potential risks and returns. Advisors can fill an important role here by helping investors diversify their portfolios or help them think through potential risks. Remember that many millennials haven’t been invested during a serious market crash, so advisors can really add value by helping them understand and mitigate risk.
People who are new to sustainable investing are often attracted to funds that concentrate in one industry, like solar energy, because they believe these funds are a more direct way to address issues around climate change and energy independence. However, newer investors may not realize just how volatile concentrated funds can be. You could help them determine if speculative stock funds are right for them, and if so, how these funds might fit into their portfolio.
