Understanding a client’s preference for impact investing

Education is Key

There’s some opposition and misinformation in the media around impact investing. That’s why the education of the adviser and the client is vital for impact investing.

Adviser confidence and competence in this space is vital to develop investor trust when advising on impact investments. Advisers do not need to know all the answers but do need to be able to show people that they know what the relevant questions are. Advisers also need to overcome objections, build confidence, and increase awareness and understanding of clients.

Client education is key in helping identify priorities, demystify options and clarify confusion relating to impact investing. Many advisers recommend developing scripts and FAQs that address the common questions and objections that your clients have with respect to investing and impact strategies.

Investment Philosophy

Advisers need to have a comprehensive and robust investment framework that helps set their clients on the path to achieving their values and goals over the long term.

“I think for advisers wanting to recommend impact investments, they need to consider how Impact Investing fits into the entire investment ecosystem because you’re unlikely to recommend investing someone’s entire wealth in impact investments. It’s about considering how impact investing fits into the client portfolio”

– Fiona Thomas, General Manager & Financial Adviser at Ethinvest.

The foundation of an impact investing framework is the overarching Investment Philosophy and how impact investing and responsible investing fit into this framework. And for the client, the foundation of this framework is the expanded Investment and Impact Policy Statement that talks not only about broad investment goals and objectives, asset allocation, risk tolerance, etc., but also layers in responsible investing and their individual values and investing preferences.

Conversations that Matter

Almost all advisers agree on the importance of client questions to uncover a client’s values and investing preferences for impact investing.

Example questions to uncover a client’s investing preferences for impact investing:

Do you want to include a responsible investment strategy in your portfolio?
Do you know the difference between ESG, SRI and impact investing?
Do you want to make a difference to society or the environment based on your investment choices?
Do you actively want to pursue specific strategies that seek to provide a positive impact on the environment or society?
Do you want to be able to measure the impact that your investment is having?
Would you consider your approach to impact investing as impact first or finance first?
What outcome would you like to see from your investments?
What level of reporting is important to you?

Discussion and Measurement Tools

The development or use of visual aids and tools can support the client discovery process, fact-finding, and ascertain the individual preferences that a client may have when investing for impact.

Visual tools can help guide the conversation, creating a framework for discovery and articulation of what is of most importance to an investor. These can be presentations, questioning prompts, surveys and quizzes.

As an example, the below table provides a framework for supporting the discovery of a client’s values and investing preferences as follows:

Step 1. Review the table below and choose the causes of the most importance / highest value to you.

Step 2. Rank the causes in order of priority. Whilst all factors are equally important, rating them relative to each other helps to create a more personalised impact investing strategy.

Step 3. Consider the application and which aspects are specifically important to you within each category you’ve ranked priority

Impact Investment Preferences Worksheet

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