Sustainable investing may offer advisors an opportunity to connect with younger clients as they inherit wealth from their parents.ChayTee/iStockPhoto / Getty Images
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Most advisors don’t bring up environmental, social and governance (ESG) considerations proactively in discussions with prospects, according to a recent white paper from ED4S Academy, a Montreal-based firm focused on sustainability.
The academy hired secret shoppers who posed as prospective clients in meetings with advisors. Maria Maisuradze, a chartered financial analyst in Montreal and co-author of the white paper, was also one of the four shoppers posing as a prospect. They visited forty advisors across Canada at both large financial institutions and smaller boutique firms. Only 20 per cent of the advisors brought up ESG considerations with the secret shoppers.
Globe Advisor spoke recently with Ms. Maisuradze about the white paper’s findings and how advisors can approach clients interested in ESG products.
As you were personally a secret shopper, what main conclusion do you arrive at?
If a client wants to invest their money with ESG considerations in addition to financial criteria, it will be difficult to find an advisor who is able to sit down … and guide them properly. We’re talking about individuals who are not necessarily high-wealth individuals, but rather the mass market. I believe sustainability could help advisors preserve their [client bases] because it’s a soft topic and it’s a values topic. It represents a great opportunity to connect with millennials who are inheriting wealth from their parents and are starting to make decisions. Many want to align their investments with their values and they’re concerned about climate change.
What data surprised you the most?
While some advisors are personally interested in sustainability, they mentioned their firms don’t place much importance on the issue. That surprised me because every large financial institution says they’re committed to net-zero targets and are promoting their corporate social responsibility and sustainability reports. It’s surprising these things don’t trickle down. It’s a missed opportunity to engage employees.
Why do you think ESG products are rarely discussed?
ESG topics and ESG investment products are outside of most advisors’ comfort zone. At ED4S, we are building a simulator that practices discussions with fictitious sustainability-driven clients to address this gap. Most of the time, advisor conversations with clients don’t go there and that’s the challenge we’re trying to solve. There are multiple obstacles. The first piece is understanding their client’s full priority list. The second is, a lot of times, the fact sheets that describe the ESG [strategy] are not very clear. So, many advisors try to not even navigate toward those products as they would need to go and get additional information from the investment teams. It’s rather complex.
For example, I reached out to an asset manager to understand the philosophy of an ESG fund by looking at the fact sheet. And I realized that the investment strategy, beyond the name of the fund, is really not communicated to advisors, which hampers their ability to answer client questions and have informed conversations.
– Deanne Gage, Globe Advisor reporter
This interview has been edited and condensed.
Must-reads from Globe Advisor this week
New target-maturity bond ETFs speak to investor demand for stability amid uncertain rate outlook
Target-maturity exchange-traded funds (ETFs) are bond funds that hold securities that mature in a given year, providing the surety of an individual bond but with some additional advantages. “These funds mature like a bond, have the liquidity of a stock and the diversification of a mutual fund,” says Stephen Hoffman, managing director of ETFs at RBC Global Asset Management Inc. RBC GAM has offered target-maturity bond ETFs since 2011, but competition in the space is growing with a flurry of new products released this year. Jamie Sturgeon reports on how advisors can use them.
How wealth management firms are expanding their offerings through money coaching
With more clients requesting a deeper dive into their relationship with money and their financial habits, some wealth management firms and advisors are augmenting their services by bringing financial coaches on board. The approach is proving useful for serving younger clients who are looking to build confidence or those navigating multiple financial priorities. Thuy Lam, who joined Objective Financial Partners in December to offer both money coaching and financial planning, recognized a coaching opportunity in her practice when clients started telling her they felt as though they were talking to their therapist. Helen Burnett-Nichols reports on how firms are incorporating coaching services into their broader offering.
Three big mistakes advisors make when integrating alternative assets into client portfolios
More advisors are turning to alternative investments to broaden the options available for clients, but that doesn’t mean products are always being used as intended. Many advisors put older clients who may need their money sooner into private market funds meant to be held for the long term, says Will Stevenson, senior research associate at Investor Economics, an ISS Market Intelligence business. “That’s where some of the early redemptions come from.” Deanne Gage reports on three common mistakes advisors make when investing in alts.
Longevity products have role for aging Canadians, but adoption has been slow
The biggest question for many aging Canadians is how to fund their retirement – and how much they can spend each year to ensure they don’t run out of cash. Three years ago, Purpose Investments Inc. launched longevity products that aim to provide lifetime income, and Guardian Capital LP released its own “modern tontine” funds the following year. Yet, it’s taking time for the products to gain traction. “We knew this fund was going to take time to catch on given how innovative it is, so it’s not a strategy we expected people to pour money into right away,” says Fraser Stark, president of Purpose’s longevity retirement platform. Gillian Livingston writes about the sales challenge and how to fit the products into portfolios.
Also see:
How advisors can expand their referral networks beyond lawyers and accountants
Why capital gains changes have some business owners looking at IPPs
How employee ownership trusts fit into business succession planning
This money manager is betting on a slow energy transition. Here are some stocks he likes on the way
How this former Alberta energy executive is enjoying a fulfilling retirement in Nova Scotia
What you and your clients need to know
Bare trusts and the UHT: How tax rules meant for crooks and global elites ensnared thousands of Canadians
Over the past six months, Ottawa has taken the rare step of walking back on two separate sets of new tax-filing rules – the bare trust requirements and the equally controversial Underused Housing Tax. Both contained measures to collect more information on trusts and other legal structures, and both backfired in similar ways. How did this double tax fiasco come to be? Erica Alini reports.
One-day stock trade clearing launches in Canada
Investors might never notice, but the way Canadian capital markets function fundamentally changed this week after a process that began almost 30 years ago was finally completed. Settlements, the complex undertaking that ensures money and securities change hands properly every time stocks or bonds are bought or sold, previously had to be completed within two business days of the trade itself. As of Monday, however, settlements now have a single business day to be completed. Jameson Berkow reports.
Commercial real estate’s last best hope, industrial and storage properties, hit by oversupply – and investors are spooked
Two years into the most intense campaign of interest-rate hikes in decades, commercial real estate’s last bastions of support are faltering, with industrial and storage property owners succumbing to oversupply and slowing demand. Until recently, these two sectors were considered immune from the downturn spurred by higher interest rates because their demand remained so strong. But just like the owners of office towers and rental apartment buildings before them, industrial and storage landlords are struggling with weaker valuations, darkening the cloud that has hung over the industry. Tim Kiladze reports.
A breakdown of the big banks’ second-quarter earnings
Canada’s biggest banks reported their second-quarter earnings this week, covering the three months that ended April 30. The lenders are dealing with concerns about high borrowing costs and slower economic growth until central banks start cutting interest rates. Stefanie Marotta breaks the earnings.
– Globe Advisor Staff