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A few years ago, I wanted my investment portfolio to be more values-based and to have a positive social and environmental impact. Thinking that the next steps would be relatively simple, I asked our consultants – a multi-family office with a sophisticated investment capacity – to present the options, to help me Develop a goal statement and implement it in an intelligent and cautious manner with respect to taxation.
Instead, we experienced three years of great frustration that these counselors were not equipped to help me move where I wanted to go. My advisor did not have a value-oriented investment mindset and therefore had no support structure, framework or flow of operations. Even though it was difficult to break a long-term family relationship, it was time to move on.
Finding a new financial advisor is surprisingly disheartening. There are more than 300,000 financial advisors in the United States and thousands of companies claiming to offer comprehensive wealth management services. Although the search for a company with a commitment to invest in a targeted and proven way to reduce success, the ecosystem of suppliers remains confused, complicated and changing. Without a guide to guide me, not only did I have to sort through the usual choices of services, conflicts, customization, discretion and fees, but I did not even know the right questions to ask about how they could help me. to achieve a social and social goal. environmental impact.
Many investors are starting similar research these days. Interest in ESG issues, socially responsible investments and impact investments is booming. The spring survey conducted by the Financial Planning Association, the Journal of Financial Planning and the FPA Research and Practice Institute revealed that 26% of advisers say they already use or recommend ESG funds and 20% expect to an increase over the next year. Growth is expected to continue, in part because of the interest shown by Generation Y youth and women to invest in the alignment of values, two groups that will control more assets in the years to come.
The good news is that more financial advisors are interested in these trends: who is investing and how. The bad news is that many offer responsible investment choices but lack the experience, skills, and support structure to do so effectively. In a booming sector, characterized by a lot of media hype, the risk of hiring an advisor who does not really speak and who does not really know what he is talking about is bigger.
For me and for many impact investors – women in particular, who want holistic, value-based advice – finding the right advisor can be summed up in two steps: internal reflection, clarification of values and interests, definition of 39; goals; and an external analysis to understand the skills, experience and styles of various advisors and to find the ideal candidate to achieve their goals.
Answering some basic questions will focus your search:
What are your motivations and why do you want to do this? Make sure you can articulate and have your advisor understand, respect and respond to your motivations, that it includes your money in the integrity of your values. to "do no harm" to influence a specific social or environmental problem. In the latter case, find out about the advisors' experience in these thematic areas.
Does this advisor have proven and authentic experience in investing in values and impact? Today, every advisor embarks on the ESG movement and the impact. Find out if your consulting team has a proven history. Does their due diligence process go beyond the limited utility of current rating systems and does the firm have a view and systems that demonstrate integrity? What percentage of their clients are investing to make an impact?
Do you want to make private investments? If you are interested in private investments, such as seed money for a new venture or a private equity fund, this is where the track record, networks and relationships really matter. What does their pipeline look like and how do they create opportunities? Can this counselor help you navigate this landscape with caution and with full knowledge of the facts?
What is the importance of shareholder advocacy? If you want to make a proxy vote and file a shareholder resolution – and I think that's where the best way is to get an impact on public markets – ask for guidance from advisors . If they do not have one, it's a red flag.
How will the advisor work with you? Looking for an advisor who will help you analyze your financial assets in a holistic manner, adopting a values-based approach and meeting regularly to discuss impact and performance? Or do you want to be indifferent, you must know that your advisor makes the right decisions financially and socially?
Start with these first questions in your own search for an impact investment advisor. Fortunately, in the seven years since my research, more and more quality resources are directing impact investors, especially women. (A coalition I work with recently launched one of these resources, InvestForBetter.org.) The financial advisor community is strengthening its offerings. For example, the College of Financial Planning, in conjunction with the US SIF, has begun offering a new professional designation to financial advisors who demonstrate their expertise in socially responsible investing.
As an asset owner, you should always make sure you find a qualified advisor who fits your needs and your style, but this search becomes easier, there are others on the same path with which you can connect and learn, and the advisor The community is preparing to be ready for this new wave of increasingly savvy investors.
Ellen Remmer is a senior partner at The Philanthropic Initiative, which launched InvestForBetter.org.
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