The growth of portfolios that incorporate environmental, social, and corporate governance factors (ESG) has been considerable, with financial advisors a crucial conduit for providers and distributers offering mutual funds, ETFs, SMAs, and other vehicles that facilitate ESG investing. The extent advisors focus on ESG investing, their motivation for doing or not doing so, the key challenges they face, and their needs and preferences related to using these solutions are important subjects for consideration.
“Financial Advisors Use of ESG Investments” examines advisor perspectives on ESG investing among both users and non-users. The 76-page study reviews the ways advisors employ ESG strategies including the vehicles typically used, usage across their base of clients, key challenges in using ESG, key needs for support, factors in selecting ESG solutions, and how ESG usage may change going forward. For non-users, the research examines key reasons for not using ESG and the likelihood of offering these types of products going forward. The report breaks out data and findings for the entire sample and for key channels – Wirehouse/Regional broker-dealers (Full Service), Independent broker-dealers, and fee-based RIAs (not affiliated with a broker-dealer). It also examines an important group of ESG enthusiasts who have incorporated these strategies explicitly in their practice. Insights are based on proprietary research completed in January 2020 with over 665 advisors working with retail investors.
Key Topic Areas: Financial Advisors and ESG Investing
Familiarity and Consideration of ESG Investing
Advisors Using ESG Investments
Advisors Not Using ESG Investments
To Order the Report
The study is available in PDF format for the subscription price of $4,950. To order the complete 76-page, 47 exhibit report or for more information, please contact:
Howard Schneider, 978-590-7290 or email howard.schneider@practicalperspectives.com
Introduction and Methodology
The focus on investments that incorporate environmental, social, and corporate governance factors (ESG) has been heightened in recent years, with a growing expanse of mutual funds, ETFs, and other solutions oriented to this investment approach. As with most solutions, financial advisors are a crucial conduit for providers and distributers offering ESG screened strategies. The extent of advisors embrace of ESG investing, their motivation for doing or not doing so, and their needs and preferences related to using these solutions are important subjects for consideration.
Our goal in this new research report from Practical Perspectives - a leading consulting and research firm focused on support for wealth management firms, product providers, and distribution platforms - is to share up-to-date insights from advisors regarding their use of ESG investments, the reasons why they do or do not rely on ESG, the drivers for their behaviors, and their needs going forward. This report was developed to provide high-level insights and share the voice of advisors, and in turn, offer fresh perspectives that can further inform strategic and tactical planning. It follows up a similar study conducted in Q4 2018 to analyze how advisor usage of ESG is evolving.
“Financial Advisors Use of ESG Investments” examines advisor perspectives on ESG investing among both users and non-users. The study reviews the ways advisors employ ESG investing including the vehicles they most typically use, the extent of use across their base of clients, key challenges in using ESG, and how ESG usage may change going forward. For non-users, the research examines key reasons for not implementing ESG and the likelihood of offering these types of products in the foreseeable future. The report breaks out data and findings for the entire sample and for key advisor channels – Wirehouse/Regional broker-dealers (Full Service), Independent broker-dealers, and RIAs (not affiliated with a broker-dealer).
Among the key questions addressed in this report are:
· How familiar are advisors with ESG investing?
· To what extent do advisors consider ESG factors in constructing portfolios?
· How experienced are advisors in considering and using ESG strategies?
· How widespread is advisors use of ESG investments as measured by percent of assets managed and implementation across their base of clients?
· Is ESG investing an explicit element of advisors’ value proposition to clients?
· What investment vehicles are typically used to implement ESG strategies?
· How has use of ESG investments changed in the past 12 months and how do advisors expect it will change going forward?
· What are the key reasons advisors use ESG investments?
· What factors do advisors consider in selecting the ESG solutions they implement?
· What do users of ESG perceive as key investment-related and client-related challenges?
· What types of asset managers do advisors prefer for use in ESG investing?
· What sources do advisors rely on for help in selecting ESG investments?
· How satisfied are advisors with ESG investments and support?
· What insights do users and non-users have regarding ESG investing?
· What are the primary barriers preventing advisors from using ESG investments?
· What changes would need to occur for non-users to begin using ESG investments?
· What types of asset managers might non-users prefer to leverage for ESG investing?
· How likely are non-users to consider or implement ESG investments in the next 12 months?
· What characteristics define users and non-users of ESG investments?
This report is based on input from a randomly selected cross-section of advisors spanning key channels. In January 2020, advisors were asked to participate in a proprietary online survey concerning trends in managing assets. More than 665 advisors provided confidential responses that form the basis for this report. Advisors did not receive any compensation for participation in the survey.
A breakout of respondents by key characteristics is as follows:
Table of Contents
Section I: Executive Summary
Section II: Introduction and Methodology
Section III: Advisors Familiarity and Consideration of ESG Investing
A. How familiar are advisors with ESG investing?
B. To what extent do advisors consider ESG factors in constructing portfolios?
C. How experienced are advisors in considering and using ESG investments or strategies?
Section IV: Advisors Using ESG Investments
A. How widespread is advisors use of ESG investing?
B. Is ESG investing an explicit element of advisors’ value proposition to clients?
C. What investment vehicles are typically used to implement ESG strategies?
D. How has use of ESG investments changed in the past 12 months and how do advisors expect it will change in the next year?
E. What are the key reasons advisors use ESG investments?
F. What factors are important to advisors in selecting ESG investments?
G. What do advisors view as the key investment challenges in using ESG investments?
H. What do advisors view as the key client-related challenges in using ESG investments?
I. What types of asset managers do advisors prefer for ESG investing?
J. What sources do advisors rely on for help in selecting ESG investments?
K. How satisfied are advisors with ESG strategies?
L. What characteristics define advisors using ESG investments?
M. What enhancements do advisors desire to increase use of ESG solutions?
N. In their own words, what additional feedback do advisors have related to ESG investing going forward?
Section V: Advisors Not Using ESG Investments
A. What are the primary reasons advisors don’t use ESG investments?
B. What changes would need to occur for non-users to begin implementing ESG investments?
C. What types of asset managers might non-users prefer to access for ESG investing?
D. What sources would non-users likely turn to for support with ESG investing?
E. How likely are non-users to consider or implement ESG investments in the next 12 months?
F. What characteristics define advisors not currently using ESG investments?
G. What enhancements to support for ESG investing are of most interest to current non-users?
H. In their own words, what additional feedback do non-users have related to ESG investing going forward?
Section VI: Implications and Outlook
List of Exhibits
Exhibit 1: Advisors Familiarity with ESG Investing
Exhibit 2: Advisors Familiarity with ESG Investing by Channel
Exhibit 3: Advisors Familiarity with ESG Investing – ESG Users vs. Non-Users
Exhibit 4: Users Consideration of ESG Factors in Constructing Portfolios
Exhibit 5: Users Consideration of ESG Factors in Constructing Portfolios by Channel
Exhibit 6: Advisors Experience with ESG Investing
Exhibit 7: Advisors Experience with ESG Investing by Channel
Exhibit 8: Advisors Use of ESG Investing with Clients
Exhibit 9: Advisors Use of ESG Investing with Clients by Channel
Exhibit 10: Average Percentage of Total Assets Managed in ESG Investments by Channel
Exhibit 11: ESG an Explicit Element of Advisors’ Value Proposition to Clients
Exhibit 12: ESG an Explicit Element of Advisors’ Value Proposition to Clients by Channel
Exhibit 13: Vehicles Used for ESG Investing
Exhibit 14: Vehicles Used for ESG Investing by Channel
Exhibit 15: Change in Use of ESG Investing in Past 12 Months
Exhibit 16: Change in Use of ESG Investing in Past 12 Months by Channel
Exhibit 17: Expected Change in Use of ESG Investments in Next 12 Months
Exhibit 18: Expected Change in Use of ESG Investments in Next 12 Months by Channel
Exhibit 19: Key Reasons Advisors Use ESG Investments
Exhibit 20: Key Reasons Advisors Use ESG Investments by Channel
Exhibit 21: Most Important Factors in Selecting ESG Investments
Exhibit 22: Most Important Factors in Selecting ESG Investments by Channel
Exhibit 23: Key Investment Challenges in ESG Investing
Exhibit 24: Key Investment Challenges in ESG Investing by Channel
Exhibit 25: Key Client-Related Challenges in ESG Investing
Exhibit 26: Key Client-Related Challenges in ESG Investing by Channel
Exhibit 27: Preferred Choice for ESG Investing
Exhibit 28: Preferred Choice for ESG Investing by Channel
Exhibit 29: Sources Advisors Rely on for Help in Using ESG Investments
Exhibit 30: Sources Advisors Rely on for Help in Using ESG Investments by Channel
Exhibit 31: Satisfaction with ESG Investing
Exhibit 32: Very Satisfied with ESG Investing by Channel
Exhibit 33: Desired Enhancements for ESG Investing
Exhibit 34: Desired Enhancements for ESG Investing by Channel
Exhibit 35: Why Advisors Don’t Use ESG Investments
Exhibit 36: Why Advisors Don’t Use ESG Investments by Channel
Exhibit 37: Drivers of Potential Use of ESG Investments
Exhibit 38: Drivers of Potential Use of ESG Investments by Channel
Exhibit 39: Preferred Providers for ESG Investing
Exhibit 40: Preferred Providers for ESG Investing by Channel
Exhibit 41: Potential Sources of Support for ESG Investing
Exhibit 42: Potential Sources of Support for ESG Investing by Channel
Exhibit 43: Likelihood of Considering or Implementing ESG Investments in Next 12 Months
Exhibit 44: Likelihood of Considering or Implementing ESG Investments in Next 12 Months by Full Service BD Advisors
Exhibit 45: Likelihood of Considering or Implementing ESG Investments in Next 12 Months by Independent BD Advisors
Exhibit 46: Likelihood of Considering or Implementing ESG Investments in Next 12 Months by RIAs
Exhibit 47: Desired Enhancements for ESG Investing
“Financial Advisors Use of ESG Investments” examines advisor perspectives on ESG investing among both users and non-users. The 76-page study reviews the ways advisors employ ESG strategies including the vehicles typically used, usage across their base of clients, key challenges in using ESG, key needs for support, factors in selecting ESG solutions, and how ESG usage may change going forward. For non-users, the research examines key reasons for not using ESG and the likelihood of offering these types of products going forward. The report breaks out data and findings for the entire sample and for key channels – Wirehouse/Regional broker-dealers (Full Service), Independent broker-dealers, and fee-based RIAs (not affiliated with a broker-dealer). It also examines an important group of ESG enthusiasts who have incorporated these strategies explicitly in their practice. Insights are based on proprietary research completed in January 2020 with over 665 advisors working with retail investors.
Key Topic Areas: Financial Advisors and ESG Investing
Familiarity and Consideration of ESG Investing
- How familiar are advisors with ESG investing?
- How experienced are advisors in considering and using ESG investments?
Advisors Using ESG Investments
- How widespread is advisors use of ESG investing and is it an explicit element of advisors’ value proposition?
- What vehicles and types of providers are most widely used to implement ESG strategies?
- What are the key drivers of use of ESG and what are the main investment and client challenges advisors encounter?
- What sources do advisors rely on most for help with ESG investing and what factors are used to select ESG solutions?
- How has advisor use of ESG investments changed in the past year and how is it anticipated to change going forward?
- How do the most active “enthusiasts” using ESG investments differ from other advisors?
- In their own words, what insights do advisors have regarding the opportunity for ESG investing?
Advisors Not Using ESG Investments
- What are the main reasons advisors do not currently use ESG investments?
- What are the potential catalysts to drive advisors future use of ESG investments and what sources and types of providers are they most likely to rely on for ESG?
- How likely are non-users to consider and offer ESG strategies in the foreseeable future?
To Order the Report
The study is available in PDF format for the subscription price of $4,950. To order the complete 76-page, 47 exhibit report or for more information, please contact:
Howard Schneider, 978-590-7290 or email howard.schneider@practicalperspectives.com
Introduction and Methodology
The focus on investments that incorporate environmental, social, and corporate governance factors (ESG) has been heightened in recent years, with a growing expanse of mutual funds, ETFs, and other solutions oriented to this investment approach. As with most solutions, financial advisors are a crucial conduit for providers and distributers offering ESG screened strategies. The extent of advisors embrace of ESG investing, their motivation for doing or not doing so, and their needs and preferences related to using these solutions are important subjects for consideration.
Our goal in this new research report from Practical Perspectives - a leading consulting and research firm focused on support for wealth management firms, product providers, and distribution platforms - is to share up-to-date insights from advisors regarding their use of ESG investments, the reasons why they do or do not rely on ESG, the drivers for their behaviors, and their needs going forward. This report was developed to provide high-level insights and share the voice of advisors, and in turn, offer fresh perspectives that can further inform strategic and tactical planning. It follows up a similar study conducted in Q4 2018 to analyze how advisor usage of ESG is evolving.
“Financial Advisors Use of ESG Investments” examines advisor perspectives on ESG investing among both users and non-users. The study reviews the ways advisors employ ESG investing including the vehicles they most typically use, the extent of use across their base of clients, key challenges in using ESG, and how ESG usage may change going forward. For non-users, the research examines key reasons for not implementing ESG and the likelihood of offering these types of products in the foreseeable future. The report breaks out data and findings for the entire sample and for key advisor channels – Wirehouse/Regional broker-dealers (Full Service), Independent broker-dealers, and RIAs (not affiliated with a broker-dealer).
Among the key questions addressed in this report are:
· How familiar are advisors with ESG investing?
· To what extent do advisors consider ESG factors in constructing portfolios?
· How experienced are advisors in considering and using ESG strategies?
· How widespread is advisors use of ESG investments as measured by percent of assets managed and implementation across their base of clients?
· Is ESG investing an explicit element of advisors’ value proposition to clients?
· What investment vehicles are typically used to implement ESG strategies?
· How has use of ESG investments changed in the past 12 months and how do advisors expect it will change going forward?
· What are the key reasons advisors use ESG investments?
· What factors do advisors consider in selecting the ESG solutions they implement?
· What do users of ESG perceive as key investment-related and client-related challenges?
· What types of asset managers do advisors prefer for use in ESG investing?
· What sources do advisors rely on for help in selecting ESG investments?
· How satisfied are advisors with ESG investments and support?
· What insights do users and non-users have regarding ESG investing?
· What are the primary barriers preventing advisors from using ESG investments?
· What changes would need to occur for non-users to begin using ESG investments?
· What types of asset managers might non-users prefer to leverage for ESG investing?
· How likely are non-users to consider or implement ESG investments in the next 12 months?
· What characteristics define users and non-users of ESG investments?
This report is based on input from a randomly selected cross-section of advisors spanning key channels. In January 2020, advisors were asked to participate in a proprietary online survey concerning trends in managing assets. More than 665 advisors provided confidential responses that form the basis for this report. Advisors did not receive any compensation for participation in the survey.
A breakout of respondents by key characteristics is as follows:
- Affiliation
- Full Service BD - 14%
- Independent BD – 49%
- RIAs – 34%
- Other BD – 3%
- Industry Experience
- Less than 5 years – 2%
- 5 to less than 10 years – 9%
- 10 years to less than 15 years – 18%
- 15 years to less than 20 years – 19%
- 20 years or more – 52%
- Assets Under Management
- Less than $50 million – 35%
- $50 million to less than $100 million – 19%
- $100 million to less than $250 million – 22%
- $250 million or more – 24%
- Practice Structure
- Solo practitioner – 48%
- Small team (10 or fewer professionals) - 44%
- Large team (more than 10 professionals) – 8%
- Age
- 40 or younger – 15%
- 40 to 50 – 20%
- 50 to 60 – 31%
- 60 or older – 34%
Table of Contents
Section I: Executive Summary
Section II: Introduction and Methodology
Section III: Advisors Familiarity and Consideration of ESG Investing
A. How familiar are advisors with ESG investing?
B. To what extent do advisors consider ESG factors in constructing portfolios?
C. How experienced are advisors in considering and using ESG investments or strategies?
Section IV: Advisors Using ESG Investments
A. How widespread is advisors use of ESG investing?
B. Is ESG investing an explicit element of advisors’ value proposition to clients?
C. What investment vehicles are typically used to implement ESG strategies?
D. How has use of ESG investments changed in the past 12 months and how do advisors expect it will change in the next year?
E. What are the key reasons advisors use ESG investments?
F. What factors are important to advisors in selecting ESG investments?
G. What do advisors view as the key investment challenges in using ESG investments?
H. What do advisors view as the key client-related challenges in using ESG investments?
I. What types of asset managers do advisors prefer for ESG investing?
J. What sources do advisors rely on for help in selecting ESG investments?
K. How satisfied are advisors with ESG strategies?
L. What characteristics define advisors using ESG investments?
M. What enhancements do advisors desire to increase use of ESG solutions?
N. In their own words, what additional feedback do advisors have related to ESG investing going forward?
Section V: Advisors Not Using ESG Investments
A. What are the primary reasons advisors don’t use ESG investments?
B. What changes would need to occur for non-users to begin implementing ESG investments?
C. What types of asset managers might non-users prefer to access for ESG investing?
D. What sources would non-users likely turn to for support with ESG investing?
E. How likely are non-users to consider or implement ESG investments in the next 12 months?
F. What characteristics define advisors not currently using ESG investments?
G. What enhancements to support for ESG investing are of most interest to current non-users?
H. In their own words, what additional feedback do non-users have related to ESG investing going forward?
Section VI: Implications and Outlook
List of Exhibits
Exhibit 1: Advisors Familiarity with ESG Investing
Exhibit 2: Advisors Familiarity with ESG Investing by Channel
Exhibit 3: Advisors Familiarity with ESG Investing – ESG Users vs. Non-Users
Exhibit 4: Users Consideration of ESG Factors in Constructing Portfolios
Exhibit 5: Users Consideration of ESG Factors in Constructing Portfolios by Channel
Exhibit 6: Advisors Experience with ESG Investing
Exhibit 7: Advisors Experience with ESG Investing by Channel
Exhibit 8: Advisors Use of ESG Investing with Clients
Exhibit 9: Advisors Use of ESG Investing with Clients by Channel
Exhibit 10: Average Percentage of Total Assets Managed in ESG Investments by Channel
Exhibit 11: ESG an Explicit Element of Advisors’ Value Proposition to Clients
Exhibit 12: ESG an Explicit Element of Advisors’ Value Proposition to Clients by Channel
Exhibit 13: Vehicles Used for ESG Investing
Exhibit 14: Vehicles Used for ESG Investing by Channel
Exhibit 15: Change in Use of ESG Investing in Past 12 Months
Exhibit 16: Change in Use of ESG Investing in Past 12 Months by Channel
Exhibit 17: Expected Change in Use of ESG Investments in Next 12 Months
Exhibit 18: Expected Change in Use of ESG Investments in Next 12 Months by Channel
Exhibit 19: Key Reasons Advisors Use ESG Investments
Exhibit 20: Key Reasons Advisors Use ESG Investments by Channel
Exhibit 21: Most Important Factors in Selecting ESG Investments
Exhibit 22: Most Important Factors in Selecting ESG Investments by Channel
Exhibit 23: Key Investment Challenges in ESG Investing
Exhibit 24: Key Investment Challenges in ESG Investing by Channel
Exhibit 25: Key Client-Related Challenges in ESG Investing
Exhibit 26: Key Client-Related Challenges in ESG Investing by Channel
Exhibit 27: Preferred Choice for ESG Investing
Exhibit 28: Preferred Choice for ESG Investing by Channel
Exhibit 29: Sources Advisors Rely on for Help in Using ESG Investments
Exhibit 30: Sources Advisors Rely on for Help in Using ESG Investments by Channel
Exhibit 31: Satisfaction with ESG Investing
Exhibit 32: Very Satisfied with ESG Investing by Channel
Exhibit 33: Desired Enhancements for ESG Investing
Exhibit 34: Desired Enhancements for ESG Investing by Channel
Exhibit 35: Why Advisors Don’t Use ESG Investments
Exhibit 36: Why Advisors Don’t Use ESG Investments by Channel
Exhibit 37: Drivers of Potential Use of ESG Investments
Exhibit 38: Drivers of Potential Use of ESG Investments by Channel
Exhibit 39: Preferred Providers for ESG Investing
Exhibit 40: Preferred Providers for ESG Investing by Channel
Exhibit 41: Potential Sources of Support for ESG Investing
Exhibit 42: Potential Sources of Support for ESG Investing by Channel
Exhibit 43: Likelihood of Considering or Implementing ESG Investments in Next 12 Months
Exhibit 44: Likelihood of Considering or Implementing ESG Investments in Next 12 Months by Full Service BD Advisors
Exhibit 45: Likelihood of Considering or Implementing ESG Investments in Next 12 Months by Independent BD Advisors
Exhibit 46: Likelihood of Considering or Implementing ESG Investments in Next 12 Months by RIAs
Exhibit 47: Desired Enhancements for ESG Investing
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