Most Financial Advisors Can’t Advise On Impact

While 56 percent of wealth advisors report that a client’s interest in charitable giving is a natural connection point to a discussion about impact investing, only 53 percent of advisors admit to knowing the concept well.

And, there is a lot of buzz regarding impact investing – for now. More than 70 percent of affluent Millennials and Gen-Xers report having made an impact investment, but only 49 percent of advisors believe that the practice of investing with social or environmental purposes in mind is a long-term trend.

A new study by Fidelity Charitable called “Impact Investing on the Rise: How Financial Advisors are Adapting,”  examined the advisor perspective on impact investing and how advisors counsel clients on these strategies.

“While impact investing has grown tremendously over the last several years, this study indicates that there is still a strong opportunity for advisors to expand their knowledge of the sector,” said Sarah Gelfand, vice president for social impact programs at Fidelity Charitable. “Advisors who are savvy about the full breadth of strategies their clients might employ, including understanding the link between charitable giving and values-based investing, will be best prepared to help clients achieve their goals.”

Slightly more than half (53 percent) of advisors reported familiarity with impact investing, and awareness varies widely between those with higher and lower assets under management. Only 38 percent of advisors with less than $100 million under management report that they understand impact investing well compared to 62 percent of advisors with more than $100 million under management, according to Fidelity’s data. 

Only 49 percent of advisors believe that impact investing is a long-term change, while 51 percent say it is a passing trend. However, when it comes to personal preferences, nearly two-thirds (66 percent) of younger advisors (younger than 40 years old) say they are personally interested in impact investing, compared to just over half of advisors older than 40 years. This personal interest among next-generation advisors is mirrored with younger clients, as a large majority of affluent Millennials (77 percent) and Generation X (72 percent) indicated they had made some form of impact investment (compared to 30 percent of similar clients in the Baby Boomer and older generations).