Talking to Clients About Impact Investing Doesn't Have to Be Awkward

Client Conversations

Having a conversation with your client about their values and interests does not have to be an awkward, direct line of questioning about what their morals and values are. There are many ways you can approach this, and often, you can take information you already have about your client, such as knowledge about their career, hobbies, spending habits, and other lifestyle choices, to make the connection to what they care most about. Here are a few examples:

• If your client shops at Whole Foods and recycles, they may be interested in environmental causes. You can use this as an opportunity to talk to the client about demonstrating those values in their investment portfolio as well. Strategies that focus on resource efficiency and environmental markets could be the perfect fit. Another option to consider is ESG-focused strategies that have an investment framework in place to evaluate how companies are managing their impact on the environment.
• If your client volunteers at a homeless shelter, perhaps they are interested in aligning their investment portfolio with their passion to support local community. There are strategies that invest in affordable housing opportunities and financial inclusion.
• If your client is sensitive to market volatility and has indicated that, if given the option, they would prefer to invest in companies that manage material environmental and social risks well, there are now hundreds of ESG-focused strategies to choose from, across a variety of asset classes.

Other ways to approach a values conversation could be to mention current events and solicit reactions. Maybe your client has mentioned that they no longer shop at a certain store or buy from a specific brand because of recent headlines or experiences. It may be valuable to point out to your client that while they can “vote” with their consumer preferences, they can also “vote” with their investments.

If your client has been interested in shifting to a more sustainable portfolio, life events — such as a job change, marriage, birth of a child or retirement — can be the perfect opportunity to resurface those conversations.

The objective in having these conversations is to learn more about what your client cares about and apply those insights when building their portfolio so that the result is a solution that is a reflection of who they are. The solution will depend on the client motivations, and what they are aiming to achieve with their investments, whether it’s avoiding controversial business areas, broadly mitigating risk, or targeting specific environmental or social outcomes. In many cases, the solution can be a combination of these approaches to arrive at something that is customized and personal.

The key message here is that just because your client hasn’t asked about sustainability doesn’t mean they aren’t interested. Investors don’t come to their advisor asking for a 60/40 dividend portfolio; deciding on a solution is done through conversation and a holistic understanding of client goals and expectations.

As investor needs evolve towards a demand for more customized investment approaches, advisors can be equipped by possessing a deep understanding of who their clients are, what they stand for, and how they want to put their money to work in the world.

— Check out ESG Fund Ratings: Not Perfect, but Still Valuable on ThinkAdvisor.

Kiley Miller is an associate portfolio manager working with impact portfolios at Envestnet.