Tectonic Rumblings Portend Big Changes

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The wealth management industry has repeatedly undergone profound shifts in the investment landscape that have permanently altered the way assets are managed, the relationship between advisor and client, and the nature of investor expectations. Modern portfolio theory and the pivot toward low-expense, passively managed index funds are two such examples.

The next seismic shift looms: the demand for investments that integrate Environmental, Social and Governance (ESG) guidelines and related sustainable investment principles.

The increasing popularity of sustainable investing is already evident. Such assets are growing at an annual rate of 17 percent, and today account for $22.9 trillion in AUM, or 26 percent of the world’s professionally managed assets.1

We anticipate this powerful trend to continue, and we’ll explain how asset managers and financial advisors can position themselves to thrive in this new world.

Drivers of Sustainable Investing

The momentum in sustainable investing is unlikely to abate, in our opinion, due to marketplace demand and performance results:

  1. Investor Demand: Demand for ESG-based portfolios is coming from both institutional investors who are increasingly incorporating sustainable investing principles into their investment decisions, and from individual investors, especially Millennials, who insist that their investments reflect their values. In response, money managers, notably BlackRock and Morgan Stanley, have begun integrating sustainable investing throughout their entire research and asset management product offerings.

  2. Enhanced Risk-Adjusted Returns: There is a growing body of research that indicates companies that adopt sustainable practices produce higher, more enduring returns to its shareholders. A recent study by BlackRock showed that an ESG-focused equity index (World ex-US) outperformed a traditional equity index by 60bp on an annualized return basis for the period 2012-2018, with a lower maximum monthly drawdown.2

Why it Matters to You

The next great generation of asset accumulators, the Millennials, are twice as likely as the overall population to invest in companies targeting social or environmental goals.3 And, they will soon have the money to put their beliefs into action, as they become beneficiaries of inherited wealth of an estimated $30 trillion.4

The urgency to evolve is particularly acute for financial advisors. Baby Boomer clients will inexorably account for a diminishing source of revenue due to distribution-related asset depletion. However, the larger business risk may be the transfer of assets to the next generation, which can typically result in a loss to an advisory practice of 70-80 percent of those assets.5

To retain and grow assets, asset managers and advisors will need a business and branding strategy relevant to the increasing share of investors who prioritize a sustainable investing approach when selecting an advisor with which to work and investment vehicles in which to invest.

Creating a Relevant Brand

The growth in sustainable investing is inextricably linked to the next demographic wave about to hit the wealth management industry—the emergence of Millennials as serious investors. Consequently, any sustainable investing or values-based advisory branding efforts must inevitably consider the Millennial generation’s unique personality and preferences.

Our experience with helping asset managers and advisors develop meaningful brands that connect with targeted investor groups has taught us that successful brands share three essential traits.

  1. It Must Be Authentic: Sustainable investing is a belief system, both in the values it espouses and as a means to superior risk-adjusted performance. If you don’t believe it, investors will recognize the insincerity.

  2. A Commitment to Honesty and Transparency: It is imperative that honesty and transparency characterize all marketing and communications. Opaqueness anywhere along the communication chain breeds mistrust.

  3. Supported by Actions: Well-crafted mission statements and core values must be backed by tangible actions. It is very much about “walking the walk.”

Your brand is how your clients and community perceive you. An effective brand strategy ensures that their perception aligns with how you wish to be seen; a great strategy, however, creates an emotional connection with individuals that leaves them proud to be associated with you, translating into competitive distinction, increased pricing leverage, higher trust, and greater client loyalty.

When building a brand centered on values-based advice and sustainable investment management, there is no easy shortcut. It’s more than rewriting your website. Indeed, it requires a comprehensive approach and relentless attention.

For an asset manager, that includes your communications, product offerings, content strategy, and even the channels through which you distribute your products.

For the advisor, it means everything from the relevant tools, processes and professional certifications that underlie your sustainable investment positioning to your community outreach efforts, and from the transparency of your fee structure to the presence of environmentally friendly office practices.

Since the Millennials are critical to success, any strategy must incorporate mobile and online marketing platforms, a social media plan, and educational content for investors with unique financial challenges and an appetite to learn.


1. https://www.mckinsey.com/industries/private-equity-and-principal-investors/our-insights/from-why-to-why-not-sustainable-investing-as-the-new-normal

2. https://www.blackrock.com/corporate/literature/whitepaper/bii-sustainable-investing-may-2018-international.pdf

3. https://www.morganstanley.com/ideas/sustainable-socially-responsible-investing-millennials-drive-growth

4. https://www.ey.com/Publication/vwLUAssets/ey-sustainable-investing-the-millennial-investor-gl/$FILE/ey-sustainable-investing-the-millennial-investor.pdf

5. https://www.ey.com/
Publication/vwLUAssets/ey-sustainable-investing-the-millennial-investor-gl/$FILE/ey-sustainable-investing-the-millennial-investor.pdf