Find value in values

Discover how to build your practice around values-based investing and why it is a powerful way to grow your client base and help retain the next generation of clients
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Your guide to applying values-based investing to your practice

We work with hundreds of advisors that walk clients and prospects through a personalized values-based journey, and this question gets asked often, "how do successful advisors use a values-based approach to connect with prospects and strengthen relationships with clients?"

This guide will showcase our method to help with growing client retention and generation new business by scaling your practice to deliver more without taking more time out of your day.

Step 1: Listen to your client's values

Increasingly more clients are looking for higher levels of personalization when it comes to their portfolios and since ESG investing can mean different things to different people, it's imperative for advisors to understand what clients are looking for when they do want to align their portfolios with their values. One of the biggest fears advisors have is offending clients by assuming their values. Advisors are aware of the danger of, for example, touting a weapons-free portfolio to a gun owner, or being unable to show how positive impact is generated through investment actions.

We've seen that utilizing the Values Questionnaire with clients is a strong way to find baselines for values-alignment, but also utilizing each question as a sounding board based on their response to go deeper into a conversation is impactful.

For example, if a client were to answer strongly agree with the question "I go out of my way to reduce my environmental footprint", you could ask how they are doing that or what actions are they avoiding.

This leads to new discovery on what your client cares about, but also is helpful when considering what to showcase in their impact reports.

Step 2: Diagnose the client's existing portfolio according to their values

Now that you’ve gotten to know a client’s values, the next step is to present the client with information about how their current portfolio performs according to those values. Clients become much more motivated to hear about an ESG solution when they understand how their portfolios fall short on their values.

Many times a client will not even realize that their investments are tied to, for example, labor violations or animal testing until you present that data.

There are two strategies for presenting a diagnostic to a client.

First, some advisors like to show all the data that is broadly related to a client’s values. This strategy helps you demonstrate your grasp of the complexities of ESG. The overwhelming reaction is "Wow! I had no idea this data even existed". Clients feel more secure knowing that you, their financial advisor, is considering all this complicated stuff, and making sure they aren't doing anything that violates their beliefs.

Second, other advisors prefer to focus on 3-5 metrics that they find most compelling and tell stories about how companies in a client’s portfolio might be contributing to an issue they care about. As an example, you can pick a metric on air pollution in minority communities, and use that as an opportunity to talk about environmental justice, and how corporate toxic air pollution is disproportionately borne by minority and poor communities.

We've found that clients fall into three main camps when it comes to reporting on investments:

a) Some clients just want the highlights. Show them that their portfolio has more women on boards than the benchmark, point out a top company or two, and move onto conversations on how their portfolio is performance.

b) Other clients want to know all the ways they're beating the benchmark on impact. It might be best to show a broad set of positive impact metrics.

c) The last set of clients won't be satisfied unless they see the trade-offs. If you only present them with good information, they will be skeptical that it's real. With these clients, it's best to show some areas where your portfolio is performing worse along with ways that your portfolio is creating a positive impact.

Step 3: Show a side-by-side comparison of where the client's portfolio is, and where it could be

Now that you’ve diagnosed a client’s portfolio according to their values, compare their existing portfolio to your proposed replacement.For this step, we recommend getting as tangible as possible and utilize the comparison relative report. When showing this report with a client it's best to show impact Instead of numerical scores. Show the impact in terms that clients can relate to. For example, illustrate that switching portfolios would eliminate fossil fuels from the portfolio while making the client responsible for 15 fewer asthma attacks per year and 210 more meetings led by women. These types of tangible metrics can produce an immediate emotional resonance and understanding.

With all of our reports, you’re able to dig into any metric you would like. For example, if a client was interested in seeing toxic air pollution and to how better impact their portfolio with investments that help in making the air a bit cleaner, you could click into the theme. Then see the list of companies that offer different benchmark comparisons should your client want more or less exposure to toxic air pollution. You could survey the universe or drill down to a specific company within an investment product.

This can be very helpful when it comes to finding better products to offer to clients in the areas they value most.

Conclusion: Values-Based Investing can be a strong way to retain and grow clients in 2023

Using these 3 steps can be the starting point for many conversations around values-based investing and hope it leads to stronger client interactions and better outcomes.


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