Connect with us

Markets

Millennials are Investing With a Purpose, and It’s Changing Wealth Management

Published

on

Sustainable Investing infographic

Millennials Investing With a Purpose

22% of Total AUM in U.S. are Sustainable Investments

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

If you’ve been paying attention to your social media feeds or most news outlets, it should be pretty clear to you that millennials seem to be “killing” just about everything – from Applebee’s to the entire golf industry.

While this “killing” meme is obviously a ridiculous hyperbole, there is at least some truth to it.

As the largest generation in American history, millennials are gaining sway and buying power quickly – and businesses that do not take heed to their preferences could feel the burn. Even worse, over the long run, some industries and businesses may go the way of the dodo.

The Rise of Sustainable Investing

The latest thing that millennials are “killing”? It’s the act of investing solely just for financial returns.

There’s mounting evidence that millennials are putting their money towards investments that have another component: making a positive societal impact. This practice is called sustainable investing, and it considers criteria around environmental, social, and corporate governance for investments in addition to the aspect of financial returns.

Put another way, many millennials want to put their money towards companies and funds that are helping to do things like alleviate poverty, protect the environment, or further human rights around the world. They want to generate ROI in both financial and social spheres.

Proof in the Pudding

Over the last decade or so, the amount of assets under management (AUM) for sustainable investments has ballooned to a whopping $8.72 trillion in the U.S. for 2016:

Sustainable Investing over the years

Since 2014, that’s a 33% increase – and even more interestingly, sustainable investments now make up 22% of the $40.3 trillion of total AUM in the United States.

Why is sustainable investing so popular among millennials? Here’s a rundown, mostly coming from recent research from Morgan Stanley:

  • Millennials are putting money in sustainable investments at a rate 2x higher than average.
  • 86% of millennial investors say they are “very interested” or “interested” in sustainable investing.
  • 61% have made at least one sustainable investment action in the last year.
  • 75% think their investments can influence climate change.
  • 84% think their investments can help fight poverty.

And with a $30 trillion wealth transfer coming to millennials over the coming decades, this preference of using investments as a vehicle for creating positive social change is more than just a trend.

The Big Question

There does remain one big question that millennials and wealth managers are focused on: do sustainable investments provide similar financial returns to regular investments?

Millennials are willing to take a risk that they don’t – in fact, Morgan Stanley found that 59% of millennials believe that there is a trade-off between social impact and financial returns.

Interestingly, some data is already providing a counterpoint to this narrative. In a report from Morningstar and WSJ, for example, it’s shown that funds focused on sustainable investments have offered superior performance to non-sustainable investments over periods of one, three, five, and 10 years.

Whether this stays true for the future remains to be seen – but it will be an important and fun metric to watch.

Click for Comments

Investor Education

The Top 5 Reasons Clients Fire a Financial Advisor

Firing an advisor is often driven by more than cost and performance factors. Here are the top reasons clients ‘break up’ with their advisors.

Published

on

Published

on

The following content is sponsored by Morningstar
This circle graphic shows the top reasons for firing a financial advisor.

The Top 5 Reasons Clients Fire a Financial Advisor

What drives investors to fire a financial advisor?

From saving for a down payment to planning for retirement, clients turn to advisors to guide them through life’s complex financial decisions. However, many of the key reasons for firing a financial advisor stem from emotional factors, and go beyond purely financial motivations.

We partnered with Morningstar to show the top reasons clients fire an advisor to provide insight on what’s driving investor behavior.

What Drives Firing Decisions?

Here are the top reasons clients terminated their advisor, based on a survey of 184 respondents:

Reason for Firing% of Respondents
Citing This Reason
Type of Motivation
Quality of financial advice
and services
32%Emotion-based reason
Quality of relationship21%Emotion-based reason
Cost of services17%Financial-based reason
Return performance11%Financial-based reason
Comfort handling financial
issues on their own
10%Emotion-based reason

Numbers may not total 100 due to rounding. Respondents could select more than one answer.

While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven.

Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals. Additionally, wealthier, and more financially literate clients are more likely to fire their advisors—highlighting the importance of understanding the client. 

Key Takeaways

Given these driving factors, here are five ways that advisors can build a lasting relationship through recognizing their clients’ emotional needs:

  • Understand your clients’ deeper goals
  • Reach out proactively
  • Act as a financial coach
  • Keep clients updated
  • Conduct goal-setting exercises on a regular basis

By communicating their value and setting expectations early, advisors can help prevent setbacks in their practice by adeptly recognizing the emotional motivators of their clients.

Visual Capitalist Logo

Curious about what drives investors to hire a financial advisor? Discover the top 5 reasons here.

Click for Comments

You may also like

Visualizing Asia's Water Dilemma

Subscribe

Continue Reading
HIVE Digital Technologies

Subscribe

Popular