Impact Investing: What Every Financial Advisor Should Know

Impact Investing: What Every Financial Advisor Should Know

Many of today’s advisors know their way around ESG mutual fund and ETF offerings, yet they are largely unfamiliar with the much broader spectrum of investment products available across asset classes in impact investing.



Why could that be a problem? Because, beyond the general need for more urgent action to solve humanity’s challenges, investors increasingly look to their advisors for guidance on impact investing—and not finding it. A recent study by the Rockefeller Foundation found that investors actually see their FAs as roadblocks to getting in on impact investing opportunities. The study cited “difficulty sourcing credible investment advice” as investors’ biggest problem in increasing their impact-investing allocation.

How can advisors bridge the gap between their knowledge of the space and client demand? Let’s start with the top three reasons why all financial advisors should know about impact investing.

1. Impact investing – real and growing. Investing that considers ESG (environmental, social and governance) factors now accounts for $12 trillion—that’s one in four dollars—of the total assets under professional management in the US. For investors looking for deep impact, private markets—spanning risk/return profiles and asset classes from cash to fixed income to private equity to real assets—currently offer the best options.

2. Clients are demanding impact investing options; FAs must catch up. Per the Morgan Stanley Institute for Sustainable Investing, 75% of individual investors, 84% of women, and 86% of millennials are interested in sustainable investing, along with 77% of institutions saying they have a responsibility to address sustainability issues through their investments.  

3. Discussing impact investing with clients will bring dividends manifold to your practice. Starting the impact conversation is easier than you think—and it can really help your practice. Start with what your clients are passionate about and have that conversation. Investors interested in impact are usually driven by personal values – by their hearts and minds—not only by financial returns.

As the advisory space becomes increasingly commoditized and automated, talking about impact can enable you to have deeper, more meaningful contact with your clients, helping you differentiate your practice.

For more information, please read:
Three Reasons Why Every Financial Advisor Should Know About Impact Investing | Financial Advisor Magazine

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