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Financial Planning > Charitable Giving > SRI Impact Investing

How Financial Advisors Are Adapting to Impact Investing: Study

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Despite the growing popularity of impact investing among investors and asset managers, just 41% of financial advisors have discussed impact investing with their clients and only about half  report familiarity with the topic or view it as a long-term investing trend, according to a new study from Fidelity Charitable.

In contrast, 70% of affluent millennial and Generation X investors report having made an impact investment, illustrating a disconnect between advisors and younger investors as well as a potential opportunity for advisors to serve more of those clients and keep the ones they have. Forty-four percent of advisor clients said that help from an advisor would encourage them to make an impact investment.

The Fidelity Charitable study also found that advisors with more than $100 million under management are much more familiar with impact investing that those with fewer assets (63% vs. 38%). Two hundred fifty advisors were surveyed for the study, but the analysis focused on 175. The data on investors’ preferences comes from a survey Fidelity Charitable conducted last year.

Fidelity Charitable’s interest in advisor attitudes about impact investing stems from the growing trend it has seen among its donors, who are “thinking about more expansive ways to provide support” to the causes they care about beyond their charitable contributions, according to Sarah Gelfand, vice president for social impact programs at the donor-advised fund.

More investors who have an account at Fidelity Charitable or at other DAFs would like their money in the DAF to be invested in impact or sustainable investments before the funds are deployed to the charity of their choice, essentially doubling — or at least increasing — the impact of their DAF funds.

In addition, more of the charities and nonprofits donors support with their donations are approaching donors to provide additional help via their investments, said Gelfand. Rather than going to a bank, a charity might ask its donors for a loan, and the interest earned on the loan — Gelfand calls it a “recoverable grant” — and the loan principal would be would be channeled back into the client’s donor-advised fund, Gelfand explains. Fidelity Charitable, which is the largest DAF in the U.S., with assets near $27 billion, allows its DAF clients to make such leveraged loans and to invest in a variety of impact investing pools. Roughly $1 billion of those assets are invested in impact investing.

The Fidelity survey concludes that “client interest in impact investing is showing no signs of slowing down, but advisor help is needed to provide guidance and dispel myths related to the practice.”

It recommends that advisors continue “their impact investing education … to provide meaningful advice to clients who are interested in investing their way.”  Those advisors “will be in the best position to deepen client conversations and build multi-generational financial plans that will make an impact now and in the future.”

— Check out SRI, ESG and Impact Investing: What Advisors Should Know on ThinkAdvisor.


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