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Why Should FAs Learn More About Impact Investing?

By Crucial Clips     October 11, 2017
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Sep. 7, 2017 

BRUCE LOVE, MANAGING EDITOR, FINANCIAL ADVISOR IQ: Hi, this is Bruce Love with Financial Advisor IQ, and I’m here with Craig Pfeiffer, who is the president and CEO of the Money Management Institute. Craig, you’ve set up a partnership with Morningstar providing education now for advisors looking to understand ESG, sustainable investments, and whatnot for the purposes of them helping their clients to understand this. Critical point, I’d say, is that I’m not sure the advisors are really that into this area of investing.

CRAIG PFEIFFER, CEO, THE MONEY MANAGEMENT INSTITUTE: Well, I think that’s fair, Bruce. The advisors haven’t demonstrated that they’re into it. They haven’t said no, they have not also said yes. And there’s a lot of history around that. Think about how we’ve introduced real estate into traditional stocks, bonds and cash investing over the years. Think about the various cycles we go through with hard assets and soft assets and commodities, alternative investments. And you think of it as another new dimension, an evolution some of it fueled by technology, some of it fueled by data, some of it just being fueled by access to information. Applying these principles around impact investing, the whole sustainable investing initiative is really based on enabling advisors to have a conversation with their clients.

Clients are raising these issues. It’s in the clients’ lives. It’s on the clients’ minds. And so it comes up with an advisor [who] knows he needs to bring it up with their client or she’s hearing it from their clients and needs to be able to respond. So I wouldn’t suggest that they’ve said no as much as they haven’t said yes yet. And what we’re really hoping to do is to move them towards that yes with competency, with confidence, being able to deliver.

BRUCE LOVE: Fair enough point. Obviously, not all the advisors would be for or against it. I wonder, though, with the many advisors simply believing this is some sort of flash in the pan. It’s a trend in investing that is probably like other trends in the past and probably going to go away.

CRAIG PFEIFFER: So, we’ve all lived through those, right? We’ve seen the cycles come. Some are short cycles, some are big short cycles, some are long cycles. I think about this different as not being a cycle or not even being a trend. It’s an emerging difference, if you will. It’s a transition. Because I don’t think we’re going backwards. And so we’re not going to go backwards around this topic that, at its core, is about clients as investors, but clients as citizens, clients as human beings, clients who have daily lives that have principles. They have values, they have items that matter to how they operate their life, how they raise to children, how they conduct their citizenry.

And forever, that was over here and then you did investing, then you made your asset allocation decisions, you made your savings and spending decisions. And it wasn’t aligned with how you lived your life every day or how you thought on it on an every-night basis. I actually think about sustainable investing and impact and the principles and the ESG elements of portfolio construction as a way to express those values in an investment way. It is starting to couple. It is that trend. That is why the traction is coming along. To imagine decoupling that, we’re going to go back to saying, I’m going to invest and then I’m going to live over here. I think that’s a hard trend to break.

BRUCE LOVE: I guess inevitably, whether you’re for or against it, it pays to have a little bit more information on what it’s about.

CRAIG PFEIFFER: It’s an ever-changing world. Certainly the markets are ever-changing. The demographics in their preferences and choices are ever-changing. So yeah, I don’t think you just walk away from it. It does become part of it. And I think adapting to technology — I wasn’t the first guy to get an iPhone. I’m still not the best user of my iPhone, but I’ve got one. And I think this is one of those cases where, as information becomes available, that creates education, becomes competency, which ultimately leads to confidence. And there is always going to be early adopters, there’s going to be rabbits out front, and there’s always going to be people that stay back and watch, but we think there’s a pretty large middle here that wants to move forward.

BRUCE LOVE: Fair enough, Craig. Thank you very much.

CRAIG PFEIFFER: Bruce, thank you.