This is the digital age, and one of the hallmarks of that is customization. We’ve done a complete paradigm shift from the days of Henry Ford, when he advised his customers in 1909 that they could have any color car they wanted, so long as it was black. That statement works not only literally, but as a metaphor: black is, technically speaking, the absence of color. And that statement signaled the absence of choice.
Well, we have it now. Choices abound. Amazon, which has given traditional bricks-and-mortar retailing as much of a challenge as it’s ever had, thrives by offering a wider array of products and being obsessed with what customers want. And that’s not unique to Amazon: many companies in the digital economy have similarly obsessive foci on finding out what their customers want, and providing that.
In the financial industry, however, there’s still a fair amount of 1909-era Henry Ford thinking. Morningstar, citing a Morgan Stanley survey, noted last year that more than 60% of financial advisors reported little or no interest in sustainable investing, citing lack of information and familiarity with the discipline. Overall, however, about three-quarters of investors were interested in sustainable investing, particularly millennials (the fastest growing group) and women.
There were several useful articles recently noting this gap in the supply-demand landscape, and lots of useful advice on how advisors can help close it. InvestmentNews noted that many advisor objections to offering more sustainable-investing choices can be hampered by misconceptions about performance, perception and lack of knowledge, and talked about ways to overcome these. Those themes, particularly the myth of underperformance, were echoed by a piece on ThinkAdvisor, and Seeking Alpha provides some helpful advice on how to categorize different sustainable investing strategies. A global study of investors noted that 64% of investors (among 22,000 surveyed) increased their allocations to sustainable funds over the past five years.
Here are some quick takeaways for advisors who want to be more responsive to their clients’ interests:
The statements and opinions expressed are those of the authors of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security.