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Will Financial Advisors Need to Become JEDI Masters to Retain their Clients?

GenderSmart recently created an investor toolkit that applies an impact lens of justice, equity, diversity and inclusion (JEDI).

A dear friend (let’s call her Hannah) once confided to me that she was apprehensive about calling her financial advisor about her investment goals.

“But why?” I couldn’t help myself. How could this confident, successful colleague be intimidated by a person she pays to execute her specific investment objectives?

Her response floored me.

Hannah described how she had first broached a personal ambition—to move a portion of her portfolio into socially responsible investments, only to be politely dismissed by her financial advisor.

Hannah admitted, “I don’t want to change financial advisors, but I don’t like being dismissed. On the other hand, is it fair to ask my advisor to shift his strategy without providing any resources to guide him?”

Hannah decided to stay with her advisor but continues to keep her eyes open for opportunities to move her financial assets to better align with her values.

Hannah isn’t alone. She is among a growing number of Gen X and millennial women who are gaining control over trillions of dollars in wealth and who are increasingly aligning their investments with what they feel is best for their community, their neighbors and the planet.

To contextualize this paradigm shift using research compiled by Community Capital Management:

  • By 2030, American women are expected to control much of $30 trillion in financial assets.
  • Millennials are twice as likely as the overall investor population to invest in companies targeting environmental or social goals.

This wealth transfer and the simultaneous paradigm shift of aligning money with personal values means that many financial advisors are rapidly developing new skills and earning relevant credentials that appeal to sustainably minded investors. In doing so, these financial advisors hope to not only retain their existing clients but also snag clients who are disappointed with their current advisors’ reluctance to identify and execute socially responsible investment options.

According to the 2021 EY Global Wealth Research Report, clients are now investing for purpose and looking beyond financial return on investment. Financial advisors should note that 35% of clients who have sustainability goals are looking to switch wealth managers in the next three years, over twice as many as among clients without sustainability goals (15%).

At the same time, a quarter of millennial clients see sustainable investment proposition as the most important factor when selecting a new wealth manager.

While investors like Hannah can clearly articulate their desire to align their money with their personal values of social justice (investments demonstrating characteristics of equity, inclusion and diversity), financial advisors are often left without corresponding tools to meet their clients’ expectations.

GenderSmart recently equipped investors like Hannah with resources curated to execute investment strategies that apply an impact lens of justice, equity, diversity and inclusion (JEDI). To create this innovative toolkit, GenderSmart convened a who’s who of JEDI investing leaders, including the Visa Foundation, Tides and Hogan Lovells to share their expert approaches to investing for social impact returns.

For instance, Calvert Impact Capital shared its asset class framework to illustrate how a JEDI lens can be applied across different asset classes in both product and strategy. GenderSmart also incorporated investment frameworks from Adasina Social Capital, an investment and financial activism firm that launched the Adasina Social Justice All Cap Global ETF (JSTC).

The resulting JEDI Investing Toolkit delivers actionable resources for investors craving expert guidance on making their money reflect their personal values.

While the current version of the toolkit was designed for allocators, investment influencers and intermediaries to understand the dimensions of JEDI investing, financial advisors may expect to hear client toolkit questions like:

  • Does my investment policy statement include specific policies and strategies that advance racial equity or wider social justice commitments?
  • Do you have a Chartered SRI Counselor (CSRIC) credential offered by US SIF?
  • Have any leadership roles at your firm ever been held by a woman or person of color? What is the current diversity of your firm?

If you cannot already answer these questions from your clients, it’s time to start drafting talking points. Investors are being trained every day by groups like GenderSmart and Invest for Better to ask the big questions and take control of their assets.

I’ve already forwarded on the JEDI Investing Toolkit to Hannah and am curious how she’ll use the resources to frame a conversation with her existing advisor.

For the record, no one expects you to be a JEDI Master, so you can repackage that lightsaber. Only a freelance writer needs to resort to that level of gimmick.

Andrea Longton, CFA, is the founder of The Social Justice Investor and co-host on Renegade Capital Podcast. You can follow Andrea on LinkedIn and Twitter.  

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