Clients may not explicitly say they want to ESG or sustainable investments - just like they may not say that they want an ETF with a low expense ratio. It's a danger to assume that your client doesn’t want to invest with impact when they may just be lost in the vocabulary.
Asking clients if they want “ESG” may be met with blank stares unless they work in, or have more experience with, professional finance and investing. The average person speaks about the categories of ESG without using the term, for example access to healthcare (social) or clean drinking water (environmental), board makeup (governance).
In 2020, financial media headlines heralded the growing wave of ESG (Environmental, Social and Governance) investing. In spite of this, many wealth advisors don’t report prospective clients explicitly asking for ESG funds so the assumption is that demand for these funds must be happening “somewhere else”.
TIP 1: Odds are Your Clients Want ESG
Assume your clients want to invest with impact.
Studies show that around 85% of investors want sustainability and impact in their portfolios. It is more likely than not that your clients will want ESG.
TIP 2: Impact Is Not One Size Fits All
Impact means different things to different people. Recognize that for some people investing with impact is to prioritize the environment. For other people it is to put human well-being, such as education and jobs, ahead of the environment. Understand that the goal is values alignment and not cookie cutter definitions that may or may not resonate with your clients.
TIP 3: Yes or No Questions Do Not Work
In general, going down a check list and asking anyone yes or no questions is not a productive undertaking, nor is it the best use of time with your clients. They may feel pressure to say the answer they think you want to hear instead of expressing their own preferences and opinions.
Asking behavioral questions that avoid triggering rote responses is a better way to understanding your clients ESG preferences.
Sample Questions to Ask Your Clients to See Where They Stand on ESG
Do you think companies can succeed without gender diversity?
Do you avoid eating meat?
Do you think CEOs should go to jail when their firms commit white collar crimes?
Remember
Investors look to their advisors and managers for guidance and are willing to pay more for an advisor who not only understands their value-aligned goals but manages their portfolios in accordance with those values.
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