An advisor who’s knowledgeable about socially responsible investing and able to provide clients with strong SRI options is more likely to hold onto those clients, particularly the millennial generation set to inherit $30 trillion in wealth, according to a survey released by TIAA Global Asset Management.
The survey found that 74 percent of affluent investors would prefer to work with a financial advisor who can provide both competitive returns and social impact. Moreover, nearly 70 percent said their relationship with their advisor would be stronger if she took their personal values into consideration, and 65 percent said they’d more likely stay with an advisor who could talk to them about responsible investing.
Many advisors, however, don’t realize this. Only 45 percent of the more than 275 advisors surveyed believed their clients would be more likely to stay with them if they were knowledgeable about SRI, and they often choose not to address responsible investing options with their clients. More than three in five investors (61 percent) indicated that their advisor had not brought the topic up in the past year.
While the survey targeted affluent investors—more than 1,100 U.S. investors with $100,000 or more in assets—high-net-worth clients are even more likely to consider responsible investing an important part of their strategy and demand that their advisor recognize that, says Jill Popovich, managing director of individual advisory services at TIAA.
“We also see more desire to customize [with high-net-worth clients], so the conversation goes much deeper,” Popovich says.
Unsurprisingly, the survey found that millennial investors are more likely than their Gen X and baby boomer counterparts to want their investments to deliver both competitive returns and positive social and environmental outcomes.
The survey also suggests that perceptions about returns and the availability of options are behind the gap between interest in SRI and adoption. More than one in four of both investors and advisors said that responsible investment options are very limited or that the category lacks quality choices. And more than half of financial advisors believe responsible investing does not provide the same rate of return as other investment strategies, while 57 percent of investors believe this, despite research to the contrary.
TIAA recently compared five widely known U.S. equity responsible investment indices with the Russell 3000 and S&P 500 and found no statistical difference among the seven benchmarks.
“Indexes that follow SRI guidelines delivered long-term performance returns comparable to the broad market benchmarks,” says Amy O’Brien, managing director and head of TIAA Global Asset Management’s Responsible Investment team. “Incorporating environmental, social and governance criteria in individual security selection can in fact deliver market-competitive returns.”
Advisors who familiarize themselves with responsible investment options and their return potential will be in a much better position to answer questions bound to come their way in the future. While only a third or fewer of the investors surveyed said they currently own responsible investments, many more plan to start. Nearly 50 percent of all respondents (and nearly 70 percent of millennials) who don’t yet own responsible investments said they are interested in participating over the next 12 months, with 62 percent likely to ask their advisor about it.
