Want To Invest Your Values? Ask Your Advisor These 5 Questions

Want To Invest Your Values? Ask Your Advisor These 5 Questions

December 15, 2021
0 min read

Today, people increasingly want to align their money with their personal values—and not just through charitable giving, but in how they choose to spend and invest. Millennials, in particular, strongly prefer that their investments both perform well and influence company behaviors related to environmental, social, and governance (ESG) issues. In fact, 95% of Millennials familiar with ESG investing said that a company's ESG performance strongly shaped their investment approach, according to a recent Yahoo Finance-Harris Poll.

Many of these investors will seek professional guidance to understand ESG investment options and to implement the right approach for balancing personal values and financial goals. And yet some financial advisors are just beginning to recognize the importance of proactively engaging clients on these issues. Investors who want values-alignment in their investments should therefore feel equipped to drive the conversation with their advisor when needed.

For investors interested in incorporating values in portfolios, these are the 5 questions to ask their financial advisors.

1. Why didn’t you ask if I wanted to invest in line with my values in the first place?

It’s best to start with the tough question. Unfortunately, some advisors simply don’t prompt the discussion and otherwise disregard values in the investment process. And, since these issues may not have been part of your prior conversations, your advisor might assume it’s not important to you going forward. This question serves as a gut-check to your advisor relationship; you’ll quickly get a sense of whether your advisor can adapt and engage.

2. What do I own today?

Most investors don’t know exactly which companies are benefitting from their investments. Their portfolios and 401Ks include the names of funds that contain baskets of equities, bonds or other investment products, often with little visibility into the underlying beneficiaries of the capital invested. If that rings familiar to you, don’t be surprised when your advisor’s answer to this question reveals that some of your investments support companies you would never patronize or that clearly misalign with your values. Your advisor should be able to provide these insights.

3. How do you assess investment possibilities appropriate for my values?

After an advisor understands the issues you’d like to prioritize in a portfolio, it’s important you know the criteria your advisor will use to assess companies. For example, if you’re seeking to invest in companies that perform generally well across all ESG issues, you wouldn’t want your advisor assessing companies just based on their behavior related to environmental issues. It’s appropriate to ask what sorts of data or assessment tools the advisor uses to determine what investments might fit your overall goals.

4. Now that we’ve discussed my investing goals and my values, how do you bring that to life for me?

Having thoroughly discussed what matters to you, your advisor can share her process for creating a portfolio that properly aligns your values and financial goals. While you may initially want to invest only in companies in a specific niche with specific impact goals (like investing only in solar technology companies, for example), that approach may not align with your long-term return objectives or how much risk you’re willing (or should) take. An advisor can show you how your portfolio can be invested across various sectors, company sizes, and asset classes (stocks and bonds, for example) to create proper diversification and fundamental values-alignment at the same time.

5. How do you show me my impact?

After you understand where your investing dollars are going and which companies stand to benefit, you can ask your advisor to help you understand what that means from an impact perspective. Depending on your priorities, you can get a clearer picture of how your new portfolio lowers things like carbon emissions or energy consumption and improves things like board diversity or product safety. In ongoing dialogue and meetings with your advisor, you can request updated reports—not just about portfolio returns, but about how the companies you own continue to create a positive (or negative) impact.

The advent of values-aligned investing is allowing individual investors to have significant agency over investment portfolios and the impact they’d like to make in the world. Getting the conversation going with your financial advisor is the first step.

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