Millennials Favor ESG Amid Unfavorable Political Climate

While little concrete policy has yet been crafted, it is commonly assumed that the Trump administration will have little enthusiasm for promoting environmental, social and governance investing. 

A new survey by American Century Investments examines Millennials’ preferences pertaining to “impact” or “environmental, social and governance” (ESG) investing programs.

Matching the common assumption made about the generation’s investing preferences, American Century’s data suggests Millennials do in fact strongly favor investment opportunities that consider more than just a bottom-line return. Many would be willing to sacrifice some financial return to ensure their investments met certain ethical standards, often having to do with the environment and social justice issues.

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Overall slightly more than half (51%) of Millennials say they view ESG/impact investing ideas favorably, while just 37% of Gen Xers and 32% of Baby Boomers agree. Millennials are also far and away the most likely to say their investments’ impact on society and the environment should be among the most important and primary considerations when building portfolios.

There is a range of ESG/impact investing themes that capture Millennial’s attention. For example, one in three Millennials said “health care, including disease prevention and cures,” is what “matters most to them if they were to make an impact investment.” It should be noted that American Century provides investment opportunities along these lines.

The reporting concludes that the promotion of impact investing may not be a priority of the Trump administration, but this could be compensated for by the enthusiasm of Millennial investors—and other generations as well.

Advisers and Clients Must Discuss Risk Together

A new survey finds that only 27% of clients have been informed on potential loss in a market crash.

In a survey of 492 investors conducted by FinMason, a Boston-based financial technology and investment analytics firm, it was found that advisers and clients may be lacking on conversations concerning risk.

Among survey findings, only 1 in 4 investors were notified by their adviser on the potential loss their portfolio may face given another market crash, and of those reported, 62% stated the damage would be smaller than what their stated exposure to equities previously noted. What’s more—57% of clients are likely to sell their equities during a potential market crash out of fear.

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“I understand that many advisers don’t want to potentially scare their clients with talk about possible volatility in the market. But, if an adviser has a conversation about a crash now, in the light of calm markets, they can have a very rational discussion of why it is important to take that risk. The adviser can form a clear mental link between that risk and the potential rewards, like having a higher income in retirement,” says Kendrick Wakeman, CFA, CEO and founder of FinMason. “That turns a potentially scary conversation into a healthy and productive one. The investor now knows how much they could lose and agrees that it is important to take that risk to achieve their ultimate rewards.”

Wakeman recommends advisers discuss this with their clients as soon as possible, in order to avoid emotional turmoil when an unexpected crash occurs.

“It’s an opportunity to anticipate what could happen in a crash before it occurs, thus eliminating (or at least reducing) the emotional, sell-off response,” he says. It’s in the best interest of both advisor and client to avoid a situation where the client feels tricked or that their world is collapsing.”

More information on the survey can be found here

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