Whether they talk about it or not clients are interested in socially responsible investing (SRI) and are waiting for their advisors to start the conversation, according to new research by Toronto-based NEI Investments.
According to a study released in April, 92% of surveyed individuals say it is important to choose investment products that coincide with their values. Furthermore, 43% of respondents said an advisor who started a conversation on socially responsible investing would be more likely to get their business.
“[SRI] can differentiate you and for advisors this is becoming table stakes,” said Kim Buitenhuis, senior vice president, product and marketing, NEI Investments. “So, if you don’t know something about this, you’re going to be left behind if not today then certainly over time.” Buitenhuis discussed the study results at the 2014 Canadian Responsible Investment Conference in Toronto on Tuesday.
The study results, compiled by Environics Research Group, come from 1,100 online surveys completed by Canadians. Survey respondents who either have sole or shared responsibility for investment decisions can be broken down demographically as follows: 25 to 29 year olds with $10,000 or more in financial assets; individuals 30 to 34 years of age with $25,000 or more in financial assets; people who are 35 years of age and older with $50,000 or more in financial assets.
Yet, while clients may hope their advisors will start the conversation many are not. Of those people surveyed, 79% said their advisors had not initiated a conversation with them about SRI. Fourteen percent said their advisors had started the conversation while 8% said they didn’t know.
Advisors who do take the initiative, however, to raise the topic of SRI with clients will likely make a good impression. According to study results, 54% of Canadians believe that an advisor who discusses SRI with them will likely do a better job overall as their financial professional.
“People do understand that companies that have governance problems, companies that have environmental problems … they’re not going to be successful in the long term,” said Buitenhuis. “So, if you, as an advisor, are thinking about those things you’re probably doing a better job then someone whose not thinking about it.”
Once started, a conversation regarding SRI investments will likely tackle the same topics as non-SRI products. “You’re working with clients on their retirements,” said Buitenhuis, “that needs to be the starting point.”
According to the study the two most important features for choosing an SRI investment for clients are financial returns (97%) and fees (96%). As such, Buitenhuis says advisors need to talk about these products as they would any other investment. For example, advisors should discuss SRI mutual funds’ investment process and mandate. Once that is understood, then advisors can get into detail about the positive stories or impacts the investments make regarding environmental, social or governance (ESG) issues.