In this post:

  • Advisors are Fearful of Values-Based Investing Conversations
  • Behavioral Profiling Tools to the Rescue

From Cautious to Confident: Advisors and ESG Investing Conversations

In my last post, I wrote about the massive benefits of delivering a high-quality sustainable investing experience to clients who are interested in ESG, as revealed in ESG is Personal: A Study of ESG Preferences and Advisory Practices.*

Advisors are Fearful of Values-Based Conversations

As we share these insights from the ESG is Personal study with advice leaders, we’re picking up on a hidden barrier to speedier adoption of ESG investing by advisors, especially in the US. Turns out, many advisors are cautious or downright fearful of entering the “values conversation” minefield with their clients.

By our data, they may be right to be cautious. Among the over 50 age group in the US, about 25% place no importance at all on ESG factors—call them “ESG Skeptics”. That’s against about 20% who place high importance on ESG factors (which we’ve come to call “ESG Avids”). Compared to Singapore (9% Skeptics; 42% Avids) or the UK (14% Skeptics; 20% Avids), the US is just a more polarized place when it comes to matters of sustainability.

When you talk to advice leaders behind closed doors, they’ll tell you that many of their advisors don’t quite know how best to step into a conversation about ESG investing or values-based investing. They’re fearful of stepping on a “values landmine” by saying the wrong thing or framing the conversation in the wrong way, introducing friction into the relationship.

To boot, many advisors in the US are themselves in their 50s and 60s. Entering the brave new world of ESG investing – and the delicate, risky client conversations that go with it – just doesn’t feel worth the trouble.

Behavioral Profiling Tools to the Rescue

When we show advice leaders our profiling tools that reveal client ESG preferences, it sparks a lightbulb moment for many of them. They immediately see one application as a kind of values “radar” that can give their advisors an advance contour map of their clients’ ESG preferences, ahead of entering any kind of values-based conversation.

Advisors can email or text a link to the client, with a simple, values-neutral positioning (I’d like to understand how your values enter into your investment decision-making. Here’s 3 minute activity that I’d like you to complete ahead of our conversation next week, please.). Or, the profiling tool (which we call the Sustainable Investing Simulator) can be included in a client portal for the client to discover and complete on their own.

The profiling experience itself is highly intuitive and interactive for clients, who make a series of quick tradeoff decisions and express exclusion preferences. Advisors then have access to the results, which show the client’s Sustainability Fingerprint™ – the unique collection of ESG preferences that include measures of the client’s altruism (i.e., interest in ESG) + ESG theme preferences and conviction + ESG investing style preferences.

This is the key values intelligence that an advisor needs to know whether and how to step into a values-based investing conversation with each client – and to do so with confidence. For clients who show little interest in values-based investing, the conversation may be quick and confirmatory. For clients who value making an impact with their investments, and have preferences for certain ESG themes, the conversation can be more free-flowing and exploratory in those targeted thematic areas. These kinds of interactions enable deeper client relationships, more personalized investing and higher client confidence that their portfolio matches their ESG preferences (a central ingredient to delivering the high-quality experience mentioned at the top of the post).

Either way, the advisor can feel confident that the conversation won’t introduce friction, and for clients who are keen on ESG, it can serve as a springboard into more personalized discovery, advice and value creation.

*ESG-interested clients who get a high-quality experience show a 90+ point higher Net Promoter Scores, nearly 50% higher intent to bring more AUM to the table in the next 12 months, and nearly double the referral rate in the prior 12 months.

Pat Spenner

Pat heads marketing and strategy at Capital Preferences, driving go-to-market strategy, messaging and thought leadership.

He is a co-author of The Challenger Customer, a Wall Street Journal best-selling book on B2B marketing and sales, and has contributed to Harvard Business Review and blogged for Forbes. He lives on New Zealand’s South Island with his wife, four children and two overactive border collies

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